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

  • Boilerplate Isn’t Always Boilerplate Early stage companies are typically urged, and appropriately so, to ensure that their “charter documents,” specifically their certificate of incorporation and bylaws, are consistent with statutory requirements in their jurisdiction of organization, and reflect the short term and identifiable long-term objectives of the founding shareholders.  Many founders will search for “boilerplate” documents on the internet or other public sources, and as their enterprises grow, seek to modify those forms to cover such items as super-majority voting provisions, director removal provisions,... More
  • Amendments Make International Entrepreneur Rule More Startup-Friendly: Rule’s Future Remains Unclear The U.S. Citizenship and Immigration Services recently published the International Entrepreneur Rule (the “Rule”), which finalizes regulations intended to increase and enhance entrepreneurship, innovation and job creation in the U.S.  The Rule becomes effective on July 17, 2017.  In a prior blog, we analyzed the Rule when it was first proposed in August 2016.  Since then, the Rule has been through a period of public comment.  The resulting amendments generally make it easier for foreign entrepreneurs to establish startup companies... More
  • So You’re Looking to Exit – Why Must You Represent and Warrant? The goal of many entrepreneurs is to seek venture capital financing or ultimately sell their company in an “exit” merger or acquisition. In each case, the company’s historical operations come under onerous pressure through the representations and warranties the seller is asked to make, and the related due diligence the seller must produce. To a small business, this can be extremely uncomfortable and/or challenging. To a big business, it may be more comfortable but nonetheless more demanding. So why are they... More
  • What Changes Can We Expect at the FDA Due to the 21st Century Cures Act? Patient-Focused Drug Development Additional information focusing on the patient’s experience while using an investigative drug will be included in 505b submissions.   Input on the experience will be derived from any person, including patients, family members and caregivers of patients, patient advocacy organizations, disease research foundations, researchers, and drug manufacturers. Methodologies to collect such information will be issued in a guidance from the FDA.   Clearly, the FDA will be seeking more input regarding the experience of the patients, other than the manufacturer... More
  • One Step Closer: US House Passes “HALOS Act” Legislation Clarifying VC Pitch Events are not “General Solicitation” On January 10, 2017, the U.S. House of Representatives passed a bill commonly known at the “HALOS Act”, which directs the Securities and Exchange Commission (SEC) to revise Regulation D.  Prior to the proposed amendment, Regulation D exempts certain offerings from SEC registration requirements but prohibits “general solicitation” with respect to such offerings.  The proposed amendment states that the prohibition shall not apply to events with specified kinds of sponsors — including “angel investor groups” unconnected to broker-dealers or investment advisers... More
  • Winners and Losers Under the 21st Century Cures Act This week, the Senate passed an expansive health bill known as the “21st Century Cures Act” after the bill received approval from the House earlier this year.  Due to its far-reaching effects in the healthcare and life science industries, among others, the bill was one of the more lobbied pieces of legislation in recent history.  President Obama is expected to sign the bill into law by the end of the year. Highlights of the bill include significant amounts earmarked for improving... More
  • 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