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

  • 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
  • Massive Ransomware Attack WannaCry Spreads Worldwide On Friday, May 12th, ransomware known as WannaCry (also known as WannaCrypt or WCry) spread throughout the world, affecting more than 100,000 systems in 150 countries. Victims of the massive cyberattack included the NHS in the UK, cellular networks in Spain, universities in China and many other large organizations worldwide. For entrepreneurs who are dependent on Windows systems to run their companies, the attack highlights the significant risks and high costs associated with keeping cybersecurity on the back burner. Fox partner Mark McCreary... More
  • Five Tips for Negotiating Your First Office Lease Whether it is expanding into a new market or moving out of the proverbial garage, it is common for a startup company to sign a commercial lease agreement in its early stages. In negotiating the lease, the company’s legal counsel will rely heavily on the owner to advise on the “business terms” of the lease.  In fact, in many cases, the attorney is brought into the process after a letter of intent has been signed and the key business terms... More
  • Reverse Due Diligence – A Critical Analytical Tool for Emerging Tech Companies For investors and founders of emerging tech companies, leaving money on the table is a tragedy which can never be remedied once it occurs. An exit sale to or investment from a large strategic buyer is for many young tech companies a once-in-a-lifetime event with enormous economic consequences impacting both the company’s founders and investors. They must “get it right” with respect to the enterprise value of the emerging tech company. For reasons explained in a 2014 article by Fox Rothschild... More
  • SEC Releases New Compliance and Disclosure Interpretations on Regulation Crowdfunding On April 5, the Division of Corporate Finance of the Securities and Exchange Commission released two new compliance and disclosure interpretations (“C&DIs”) regarding Regulation Crowdfunding.  Regulation Crowdfunding was adopted in 2015 in order to implement the provisions of Title III of the Jumpstart Our Business Startups (JOBS) Act of 2012 that exempt certain crowdfunding transactions from registration under the Securities Act of 1933. Copyright: yupiramos / 123RF Stock Photo The first new C&DI addresses the disclosure requirements of Rule 201, and specifically... More
  • What The 21st Century Cures Act Did For Regenerative Medicine Under Section 3033 of the 21st Century Cures Act, a drug is eligible for regenerative medicine advanced therapy (“RMAT”) designation. To obtain this designation, the treatment must be “a cell therapy, therapeutic tissue engineering product, or any combination product using such therapies or products, “intended to “treat, modify, reverse, or cure a serious or life-threatening disease” and have preliminary clinical evidence that the drug has the potential to address unmet needs. In its Guidance for Industry entitled “Expedited Programs for... More
  • Should Robots be Taxed for Performing Jobs Ordinarily Performed by Humans? Copyright: kjpargeter / 123RF Stock Photo A recent comment by Bill Gates that robots that take human jobs should “pay” taxes, or be taxed, has stirred debate in the artificial intelligence, economic and legal worlds. Numerous questions emerge from this debate, the most pertinent being who will actually be paying the tax. This may be solved by creating a legal entity for the robot to pay taxes, just as is done to tax corporations. Many innovators in the emerging companies sector believe... More
  • Wait a Minute… Do You Have a Minute Book? Once you have made the decision to incorporate your business, and gone through the formation process, it can feel like your company is ready to take on the world. However, there is one important item that cannot be neglected: the minute book. A minute book is the living official record of a business and contains all of the important documents to reflect the business’ history. Copyright: mexrix / 123RF Stock Photo Maintaining organized records in a minute book is critical for any... More