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

  • Accelerating Start-ups by Deferring Taxes A recently passed House bill would permit certain start-up employees to defer taxes on stock options and restricted stock units (RSUs).  The proposed legislation aims to help emerging companies attract and retain talent by offering equity compensation on more attractive terms. Copyright: yupiramos / 123RF Stock Photo Cash-strapped start-ups often grant an ownership stake to employees to compensate for below-market wages.  This strategy also aligns incentives by giving employees a share of the company’s growth. However, current tax law makes such equity compensation... More
  • Should You Tolerate Hold-Over Contracts? A recent ruling by the Nebraska Supreme court reminds franchisors to properly renew their Franchise Agreements with their franchisees as they may lack contractual protection, and in the least clarity, as to their rights in the case of hold-over franchise arrangements.  Though in the franchise context, much of the lessons learned from this case may apply to any contractual arrangement where the parties have not tended to the proper renewal of the contract.  I find this happens fairly frequently for... 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
  • “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
  • 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
  • Selecting an Appropriate SAFE for Your Financing Assuming that a startup company and an investor are comfortable with the recently formulated Simple Agreement for Future Equity (“SAFE”) as the investment vehicle to finance the startup company’s early operations, the parties are then faced with the question of which version of SAFE is appropriate for the investment. Fortunately, the possible list of answers should be familiar and revolve around concepts identical to those used in convertible note financings: valuation caps, discounts, most-favored nation provisions, and combinations thereof. SAFE with... More
  • A Glimmer of Hope for the Eligibility of Software Patents After the Supreme Court’s decision in Alice v. CLS Bank, many in the patent community have faced frustration in trying to understand when software-related inventions are patent eligible. A recent Federal Circuit decision provides some much-needed guidance on this question. Copyright: hywards / 123RF Stock Photo The court in Enfish LLC v. Microsoft (Fed. Cir. 2016) disagreed with a lower court ruling that claims covering a self-referential table were patent ineligible because they were directed to an abstract idea. The court found... More
  • Do Your Employee/Contractor Non-Disclosure Agreements Comply with New DTSA Notice Requirements? Jim Singer writes: Copyright: bacho12345 / 123RF Stock Photo Have you updated your company’s form employee and independent contractor non-disclosure agreements lately? Do they comply with notice requirements relating to “whistleblowers” that took effect May 11, 2016 under a new federal law? If your answer is “no” or “I don’t know,” read on. The new Defend Trade Secrets Act helps U.S. businesses protect their trade secrets by asking federal courts to order seizure of property necessary to prevent dissemination of the trade secrets. It also permits businesses to seek injunctions and... More