Blog – Emerging Companies Insider

https://emergingcompanies.foxrothschild.com/

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

  • Curing Corporate Missteps Under Delaware Corporate Law The Problem As every founder knows, starting and scaling a company is an extremely difficult and multi-faceted undertaking. In addition to the primary goals of developing a viable product, finding (and in some cases building from scratch) a robust market, and raising the capital necessary to sustain their business and operations, founders and their core teams also grapple with the day-to-day management and operations of a growing enterprise, whether that be personnel issues, forecasting cash needs and burn rates or tackling the legal... More
  • Tax Implications of Your Stock Options Ethan Zook and Jacob Oksman write: Attracting and retaining high-performing employees is critical to the success of any emerging company. A key ingredient to securing the right talent base is an attractive and aligned remuneration plan. Most emerging companies will structure their remuneration plan leveraging three key elements: a competitive base salary, a short-term bonus plan, and a long-term incentive plan (LTI) that typically comes in the form of a stock option plan. The base salary and bonus plan are typically structured... More
  • Trump Administration Delays Regulations To Fast-Track Startups The Trump administration recently announced it is delaying – and likely rescinding – the Obama-era International Entrepreneur Rule (the “Rule”). The Rule was slated to go into effect on July 17, 2017. It would have made it easier for foreign entrepreneurs to establish startup companies in the U.S. We blogged in detail on the final Rule when it was published in early 2017. Now the Rule’s effective date has been delayed until March 14, 2018; however, implementation seems highly unlikely: the... More
  • Philadelphia Ranked Fifth in List of U.S. Life Science Clusters A study of interest for those in the Philadelphia region has recently been released. Copyright: sepavo / 123RF Stock Photo Rising two spots from last year, Philadelphia has been ranked fifth on the list of life science clusters in the United States recently published by professional services and research firm JLL.  Following Boston, San Francisco, San Diego and Raleigh-Durham, Philadelphia was cited as the leader in the “Breakout Cluster”, which are regions “making strides in life sciences through new development and a growing... More
  • Article: 21st Century Cures Act Implementation Fox Partner Jean Frydman recently wrote an article on the 21st Century Cures Act for the Food and Drug Law Institute’s member magazine Update. In it, Jean describes the significant potential of the Act to transform the life sciences sector.  She outlines the key provisions of the law and how their implementation during the next five years will impact standards and practices within the industry. These provisions include the use of Real World Evidence (RWE) in regulatory decision-making, patient-focused drug development, patient... More
  • Important Changes to the Illinois LLC Act Changes to the Illinois Limited Liability Company Act that took effect on July 1, 2017 may impact either your current Illinois LLCs or your future ventures. The changes generally conformed Illinois law more closely to a model law for limited liability companies drafted by the National Conference of Commissioners on Uniform State Laws that has already been adopted by 15 states and the District of Columbia. Copyright: tashatuvango / 123RF Stock Photo Among the changes to the Illinois law are: Default Member Management  An... More
  • Incentive Plans for Emerging Companies An incentive plan is a tool used to motivate and reward employees to grow a business and exceed goals. A common form of an incentive plan for startups is an equity incentive plan. An equity incentive plan rewards key employees with equity, which is ownership in a company. Equity can be a company’s stock if it is a corporation or its membership interest if it is a limited liability company. For startups, equity incentive plans can be a great way... More
  • Fiduciary Duties After Pennsylvania’s Act 170 Ethan Zook writes: As was alluded to in a prior blog post, one of the major changes that has been enacted through Pennsylvania’s Act 170 is the ability, through the operating agreement, to contractually vary fiduciary duties of members and managers in Pennsylvania limited liability companies. What Fiduciary Duties? Copyright: somartin / 123RF Stock Photo There are two major fiduciary duties to be aware of: the duty of care and the duty of loyalty. The fiduciary duty of loyalty is comprised of five subsections which... More
  • Term Sheet Terminology:  Cumulative vs. Compounding Dividends Issuers and investors are well advised to document their deal in a term sheet.  Though generally non-binding, they add significant value.  Detailed term sheets raise issues early when there is still ample negotiating time. They also make drafting the definitive documents more efficient, saving on legal fees. However, parties must be vigilant to document the deal properly, especially when using terms of art. Copyright: seamartini / 123RF Stock Photo For example, one commonly negotiated item on preferred stock is the dividend. Dividends... More
  • So You’re Looking to Exit – What if I Breach a Representation or Warranty? As mentioned in the first post of this series, the goal of many entrepreneurs is to seek venture capital financing or ultimately sell their company in an “exit” merger or acquisition. Upon making representations and warranties (which are essentially, assurances) associated with any of these transactions, the seller opens itself up to risk. If these assurances turn out to be false or are breached, the seller is subject to suit for breach of contract. Often, however, the parties negotiate an... More