Corporate & Securities Law Community Venture Capital

The JOBS Act, a Year Later – Part 4: Online Angel Investment Platforms

adavie@alexanderdavie.com (Alexander Davie) — Thu, 16 May 2013 12:37:00 -0400

This post is the fourth in a series examining the impact of the Jumpstart Our Business Startups Act (or JOBS Act) one year after its passage and focuses on the provisions related to online angel investment platforms.

In the last post of this series, I discussed the progress of implementing the first half of Title II of the

Options for Issuing Employee Equity in LLCs

asher.bearman@dlapiper.com (Asher Bearman) — Mon, 22 Apr 2013 14:59:00 -0400

Choosing the best type of entity for a company can be a challenge. C corporations are the norm for most emerging growth businesses, particularly those raising money from investors. However, LLCs are becoming more widespread, even for operating businesses. Founders may want to have the tax benefits of LLCs, which are not subject to a company-level tax (as is the case with C corporations) and may enable more tax deductions.

This potential for tax savings does not, however, come without a cost. LLCs tend to be more complicated and expensive to setup and manage, particularly for operating businesses. LLCs can become even more tricky for

Facilitating Startup Growth: Overview of Israel's OSC funding

trent.dykes@dlapiper.com (Trent Dykes) — Tue, 16 Apr 2013 13:20:00 -0400

If you are reading this post, then you probably share my belief that one of the best things our government can do to spur economic and job growth is to support the startup community. In recent years, government entities ranging from state (See Maryland's proposed tax credit to support investment in cybersecurity industry) to federal (See JOBS Act: What matters most for startups and VCs) to the IRS (See held a rare public ceremony in the White House's Rose Garden in its honor. Even more notably, this party was quite bipartisan-Republican House Majority Leader Eric Cantor stood right next to Obama as he signed the legislation. Since that day in April 2012, the most common criticism about the JOBS Act has been that it doesn't really exist yet. Many provisions, such as the more controversial element

The JOBS Act After One Year

klacroix@oakbridgeins.com (Kevin M. LaCroix) — Wed, 03 Apr 2013 15:04:00 -0400

A year ago, President Obama signed the Jumpstart Our Business Startups (JOBS) Act, a legislative product of rare bipartisan collaboration that was intended to improve employment and make it easier for smaller firms to raise private equity. (For an overview of the Act's provisions, refer here.) Twelve months later, many of the rules needed to implement the JOBS Act remain uncompleted and the legislation's promise remains largely unfulfilled.

As detailed in a March 29, 2013 Washington Post article entitled "JOBS

How the ACCC Scandal has Disturbed the EB-5 Market in China – Current Market Trends and Updates

Shah.Song@placeholder.com (Mona Shah & Yi Song) — Tue, 12 Mar 2013 08:59:00 -0400

Introduction:

On February 6, 2013, the Securities and Exchange Commission (SEC) charged the EB-5 project A Chicago Convention Center (ACCC) and its principal Anshoo R. Sethi with securities fraud. The project was marketed primarily in China, with great pomp and fanfare. It offered 499 limited membership interests to EB-5 investors and managed to sell more than $145 million in securities, unfortunately under misleading pretenses. There was $11 million in administrative fees collected from more than 250 investors. Despite a promise to refund this fee should the case collapse, more than 90 percent of the administrative fees have already been dissipated. Fortunately

New Delaware Chancery Opinion Affecting License Rights in Mergers

trent.dykes@dlapiper.com (Trent Dykes) — Wed, 27 Feb 2013 12:17:00 -0400

On February 22, 2013, in its Meso Scale Diagnostics, LLC v. Roche Diagnostics GMBH decision, the Delaware Court of Chancery held that a reverse triangular merger is not an assignment by operation of law, meaning that licensor consent is not required for the surviving entity to retain the target company's rights, benefits and obligations under an existing technology license.

For background, in a prior post, we discussed the impact of common M&A structures, as well as the impact of common anti-assignment provisions, on the assignability of contracts of the target

SEC Prosecution against A Chicago Convention Center EB-5 Project

yi@mshahlaw.com (Yi Song) — Tue, 12 Feb 2013 11:03:00 -0400

Investor confidence in EB-5 should be bolstered with the breaking news released on February 8, 2013, that the Securities and Exchange Commission (SEC) has charged the EB-5 project A Chicago Convention Center (ACCC) and its principal Anshoo R. Sethi for securities fraud. It is expected this is the first step of a series enforcement actions the Commission is going to take against fraud and securities law violations in the EB-5 program.

The project offered 499 limited membership interests to EB-5 investors and has sold more than $145 million in securities all under fraudulent pretenses. Anshoo Sethi has collected $11 million in administrative fees from more than 250 investors, most of which are

New NYSE and Nasdaq Compensation Committee Listing Standards

andrew.ledbetter@dlapiper.com (Andrew Ledbetter) — Thu, 07 Feb 2013 15:17:00 -0400

As we previously blogged, in June 2012 the SEC adopted final rules directing national securities exchanges to establish listing standards relating to compensation committees. The NYSE and Nasdaq have now done so.

Our colleagues Christopher C. Paci, Jason C. Harmon, Joe C. Sorenson, and Christopher B. Edwards have prepared

SEC Delays Rules on Key EB-5 Section in JOBS Act

yi@mshahlaw.com (Yi Song) — Tue, 11 Dec 2012 08:12:00 -0400

When the JOBS Act was enacted in April 2012, it raised a significant amount of excitement in the EB-5 community. At the time, there was a general consensus that the Act could change the landscape of EB-5 private offerings. However, the Securities and Exchange Commission's (SECs) indefinite delay with respect to implementing its rules currently leaves the Act in a state of limbo. One of Mary Shapiro's last acts as the outgoing Chairman of the SEC, scheduled to depart on December 14, 2012, has served to delay the application of a highly relevant section of the JOBS Act to the EB-5 investor Program.

The decision on implementing the SEC rules on this particular section of the JOBS Act has been criticized as being overly

New Leadership in China and EB-5 Practice

yi@mshahlaw.com (Yi Song) — Thu, 06 Dec 2012 08:15:00 -0400

The seven-member Politburo Standing Committee in China greeted the world in the Great Hall of the People on November 15, 2012 in Beijing. What does the new leadership in China mean to EB-5 practice? Most believe it is too early to tell. However, a few welcoming changes have already taken place.

Appreciation of the Chinese Currency

The Chinese currency RMB has been revalued rapidly since the convening of the 18^th National Congress. As of November 17, 2012 the exchange rate of the Chinese Yuan to US dollars is 1USD/6.29RMB, the highest level in the past eighteen years. That means the Chinese Yuan values more against the US dollar

EB-5 Practice under SEC Proposed Rules to Implement the JOBS Act

yi@mshahlaw.com (Yi Song) — Fri, 12 Oct 2012 08:23:00 -0400

Regional Centers^{^[1]} lawfully raise capital within the EB-5 Program^{^[2]} pursuant to one or more exemptions from registration set forth in the United States securities laws. The most commonly utilized exemptions in EB-5 offerings are Regulation D (the Private Placement exemption) and Regulation S (the Offshore Offering exemption) each promulgated under the Securities Act of 1933, as amended. Without a valid exemption, companies raising money under the U.S. securities laws must register with the Securities and Exchange Commission ("SEC") and disclose substantially

IRS Proposes Major Revisions to Circular 230

asher.bearman@dlapiper.com (Asher Bearman) — Fri, 05 Oct 2012 16:58:00 -0400

The IRS issued a notice recently that proposes some major revisions to Circular 230. The notice would change the way disclaimer footers are displayed in attorney communications, possibly eliminating the need for them altogether.

Following are some excerpts from the notice:

"

Another concern that the government has heard from practitioners relates to the unrestrained use of disclaimers on nearly every practitioner communication regardless of whether the communication contains tax advice... The disclaimers also lead to confusion for clients because clients often do not understand why the disclaimer is present and its consequences. In addition, practitioners have complained that the disclaimer's widespread overuse causes clients

VC Investment Trends

arina.shulga@gmail.com (Arina Shulga) — Wed, 03 Oct 2012 10:54:00 -0400

According to an article in Crain's NY, most of VC investments made during the second quarter of 2012 went to California companies. Out of $2.1 billion in total, only $30 million was invested in New York startups, whereas California companies received $1.45 billion. The total amount is an increase of 16% over a year ago.

$30 million in investments that went to New York was a decline of 87% as compared to the same period

A Masterstroke of Some Kind: Crowdfunding and the JOBS Act

Mon, 17 Sep 2012 15:59:00 -0400

"Everyone agrees the title was a work of pure genius," says Dick Phillips of K&L Gates in a recent podcast, referring to the Jumpstart Our Business Startups (JOBS) Act. "It's impossible to vote against in an election year." When a law is so well named, it's important to look a little deeper at what other special terms it's using and how it might work in practice. The real story is that it's the most significant change to the U.S. securities law landscape in a generation

SEC Proposes General Solicitation Rules

andrew.ledbetter@dlapiper.com (Andrew Ledbetter) — Fri, 07 Sep 2012 14:03:00 -0400

As anticipated in our previous blogs, the SEC proposed rules to permit general solicitation and general advertising in Rule 506 and Rule 144A offerings. The release proposes to create a new Rule 506(c), in which the prohibition against general solicitation would not apply to offers and sales of securities, provided that:

The issuer takes reasonable steps

Q2 2012 Highlights Growing Number of Corporate VC Investments

asher.bearman@dlapiper.com (Asher Bearman) — Mon, 20 Aug 2012 11:29:00 -0400

The National Venture Capital Association (NVCA) recently published an article that may indicate an increasing role of Corporate Venture Capital's increasing role in the startup investments arena, as reflected in Money Tree's Investment Analysis Report issued for Q2 2012.  The data

Extending US employee stock incentive plans to Australian employees

trent.dykes@dlapiper.com (Trent Dykes) — Mon, 13 Aug 2012 15:32:00 -0400

Australia highly regulates employee stock incentive plans. Failing to adapt to applicable rules can lead to adverse consequences for employees and employers and ultimately can undermine the intended purpose of such plans. Compliments of our DLA Piper colleagues, here is an overview of some of the legal and tax issues US parent and Australian subsidiary companies should consider

Article--Social Networks and the Law: Crowdfunding or Fraudfunding? Social Networks and the Securities Laws - Why the Specially Tailored Exemption Must Be Conditioned on Meaningful Disclosure

dougesten.lnc@gmail.com (LexisNexis Community Staff) — Tue, 07 Aug 2012 06:50:00 -0400

90 N.C.L. Rev. 1735, June 2012

Authors: Thomas Lee Hazen

Excerpt

Introduction

Social networks have been used as a medium for financing films and other forms of art, as well as for charitable solicitations. These and similar fundraising endeavors are known as crowdfunding. Crowdfunding is the fundraising analog to crowdsourcing, which refers to mass collaboration efforts through large numbers of people, generally using social media or the Internet. Social networks have the potential for using crowdfunding to reach large numbers of people. Since crowdfunding is designed to reach a large number of people, limiting the fundraising request to a small amount from each donor

Capital Markets Relief: JOBS Act Eases Regulatory Barriers to IPOs and Other Capital Raising Alternatives

KLGates@placeholder.com (K & L Gates LLP) — Fri, 27 Jul 2012 16:46:00 -0400

by Phillip J. Kardis II, Robert K. Smith, and Barry Spatzer

Excerpt:

On April 5, 2012, the President signed into law the Jumpstart Our Business Startups (JOBS) Act (H.R. 3606), which incorporates several initiatives aimed at easing the regulatory burdens of traditional IPOs and private placements and generally facilitating access to the capital markets. The JOBS Act is a sweeping piece of legislation and is enormously relevant to capital markets participants. Companies and their legal and financial advisors who are considering various financing alternatives should consider the

Tax Changes Are Looming

asher.bearman@dlapiper.com (Asher Bearman) — Fri, 27 Jul 2012 08:05:00 -0400

Tax planning can be challenging at any time of year, but this year may be more challenging than normal. As with any presidential election year, there is a lot of legislative uncertainty leading into 2013. Adding even more fuel to the fire, there are a number of significant tax rate changes scheduled to occur at the end of 2012 unless Congress steps in with a last-minute change.  Given the election year, an affirmative action by Congress seems very unlikely prior to November, which could result in last-minute planning for many investors.

EB-5 Practice under the JOBS Act

yi@mshahlaw.com (Yi Song) — Wed, 25 Jul 2012 12:11:00 -0400

Since the Jumpstart Our Business Startups Act (JOBS Act) was passed by Congress this past April, the EB-5 community has waited in anticipation for the Securities Exchange Commission (SEC) to revise its rules to remove the prohibition on general solicitation and general advertising under Regulation D[1] promulgated under the Securities Act of 1933 (the "Securities Act") for offerings where all purchasers of the securities are accredited investors. This article focuses on the status quo of EB-5 practice and compliance of securities law until the SEC guidelines are issued.

General Solicitation and General Advertising

Yes, Consumer, Real Estate, and Business Finance Companies, You Too Can Take the IPO On-Ramp

Tue, 17 Jul 2012 12:13:00 -0400

by Phillip J. Kardis II, Robert K. Smith, and Barry Spatzer

Excerpt:

Just as HOV lanes were created to ease the commuting burden for those who meet certain requirements, the recently enacted Jumpstart Our Business Startups ("JOBS") Act created the "IPO On-Ramp" to ease the burden of becoming and being a public company. To hop on the ramp, all you have to do is meet certain requirements, and unlike HOV lane limitations, the requirements are not very restrictive. You just need to be an "Emerging Growth Company."

In this EIA, we explore what it means to be an "Emerging Growth Company"; the benefits of the "IPO On-Ramp"; and the benefits from the JOBS Act once you become a public company. The JOBS Act, however, does more than just create

JOBS Act Heralds New Era for Startup and Emerging Growth Company Financing

PerkinsCoie@placeholder.com (Perkins Coie) — Mon, 16 Jul 2012 12:13:00 -0400

by Karl J. Ege,Martin E. Lybecker, Danielle Benderly, and James T. Carroll

The JOBS Act's stated purpose is to spur job creation and economic growth by improving access to capital for emerging growth companies. To do so, the JOBS Act will make some of the most significant changes to the U.S. securities law landscape in over a generation. Perkins Coie experts provide an overview of the securities law changes under the JOBS Act, as well as implications for private investment companies.

Excerpt:

As forecast, on March 27 the U.S. House passed the Senate's amended version of the Jumpstart Our Business Startups Act (the JOBS Act), clearing

Ten Tips for Navigating Defamation Issues in Social Media

megan.muir@dlapiper.com (Megan Muir) — Thu, 12 Jul 2012 08:40:00 -0400

Online and social media have revolutionized the way companies interact with their customers - allowing them to target customer interests and engage customers much more directly.

Entering into the world of social media, however, may pose reputational challenges. On-line stores and e-commerce platforms encourage customers to post reviews about the products they offer. Numerous companies directly prompt their customers to "like" them on Facebook or to comment on Twitter about their consumer experiences. But what if the responses customers post are less