LEGAL INFORMATION FOR TECHNOLOGY STARTUPS
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How Should Startups Handle Down-Round Financings During COVID-19?
COVID-19 has put pressure on small businesses that might not have the cash reserves to make it through lockdown unscathed. To stay afloat, many startups may turn to venture capital financing to get access to much-needed funds. Like during the previous recession, many small business owners may need to resort to down-round investments to keep their companies alive in the wake of COVID-19.
Investors Exercising Blocking Rights May Be Sued for Breach of Fiduciary Duties
Recent decisions in the Delaware Court of Chancery confirm that investors exercising blocking rights may be held liable for breach of fiduciary duties. Startups and venture capitalists alike should be careful not to prevent access to capital in times of need.
Delaware Court Cases Highlight the Importance of Directors’ Duty to Monitor
Recent cases in the Delaware Court of Chancery have permitted personal liability claims against directors who fail to monitor warning signs within businesses. To protect against liability, boards should implement clear, thoughtful procedures that alert them to issues within their organizations.
SEC Relaxes Crowdfunding Requirements in Response to COVID-19
The Securities and Exchange Commission (SEC) recently issued new temporary rules making it easier for businesses to raise money using Regulation Crowdfunding. These new rules, effective until August 31, 2020, were designed to help companies access capital more easily amid threats of lockdown and recession.
Paycheck Protection Program Flexibility Act Relaxes Requirements for PPP Loan Forgiveness
On Friday, June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA) after it was nearly unanimously passed by the House and Senate. The PPPFA relaxes the requirements for PPP loan forgiveness and gives businesses more time to pay back their debt.
Small Business Administration Releases PPP Loan Forgiveness Application and New Interim Final Rule
Learn the details of how small businesses and entrepreneurs can apply to have their PPP loans forgiven.
Safe Harbor for Paycheck Protection Act (PPP) Loan Certifications
This new safe harbor provides that any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million, will be deemed to have made the required certification concerning the necessity of the loan request in good faith. Further, the guidance provides that if the SBA determines that a borrower lacked an adequate basis for the required certification concerning the necessity of the loan it will merely seek repayment of the loan and the borrower will lose the right to loan forgiveness.
UPDATE: Federal Reserve Expands Scope Of Small, Mid-Size Business Loan Program
The Federal Reserve Board has expanded the loan options available to businesses under the new Main Street Lending Program, and opened the program to larger businesses.
Federal Reserve Unveils $600M Loan Program For Small, Medium Businesses
The Main Street Lending Program, which was announced earlier this month, is part of a broader set of actions from the Fed that would provide up to $2.3 trillion in loans to support the economy during the COVID-19 pandemic.
Electronic Signatures and Remote Notarization In Coronavirus
Bipartisan legislation was introduced last month at the federal level that would authorize all notaries to perform remote online notarizations. The bill, Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020, has been referred to a Senate committee.
CARES Act and The Paycheck Protection Program for VC and PE Backed Companies
On March 27, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act. The law provides $349 million in Paycheck Protection Program loans for small businesses, which have been devastated by the coronavirus pandemic.
Virtual Shareholder Meetings In Light Of Coronavirus
The SEC recently issued guidance for conducting shareholder meetings in light of Covid-19, while California and Delaware have relaxed restrictions for virtual meetings as people around the country are being told to stay home to fight the spread of the virus.
SEC Proposes Raise To Reg A+, Crowdfunding Limits
The Securities and Exchange Commission has proposed raising the maximum limit for Regulation A+ and Regulation Crowdfunding.
SEC Clarifies Investment Advisers' Fiduciary Duties
The Securities and Exchange Commission has issued an interpretation that reaffirms and, in some cases, clarifies the fiduciary duty that an investment adviser owes to its clients under federal law.
SEC Commissioner Proposes Token Sale Safe Harbor
In a speech at the International Blockchain Congress this month, Hester Peirce proposed a three-year grace period from the time of the first token sale, during which time the tokens would be exempted from the registration provisions of the federal securities laws.
