Equity Crowdfunding a/k/a Regulation Crowdfunding Coming Soon (May 16, 2016) to a Startup Near You

The SEC’s Final Rules for Regulation Crowdfunding were published on October 31, 2015, and are  considered effective 180 days after such publication.  Meaning that on May 16, 2016, Regulation Crowdfunding will be a go.

On that date, a company will be able to raise money under the new rules and file Form C (which still does not appear on the SEC’s Form Page).

To get a head start prior to the final rules allowing sales, and to catch up to broker-dealers who can also act as intermediaries and sell securities through the Regulation Crowdfunding final rules, Funding Portals were allowed to begin registering with the SEC on January 29, 2016, by filing the Form Funding Portal, among other things.

I’ve blogged on this before (here and here) and will be doing a number of posts solely on Regulation Crowdfunding in the near future to make sure that the basics are covered and will dig into some advanced topics.

Anyone company looking to take advantage of the new rules should start getting its house in order, by preparing its financials, its legal structure and investigating which intermediary it wishes to use for the sale of its shares, whether a broker-dealer or a funding portal.

After a further review of the new Regulation Crowdfunding rules I think they exemption provided may best serve companies looking to raise smaller amounts, such as below $500,000 (to avoid the audited financial requirement), or who are raising equity capital for the first time.  There is a huge need for smaller companies to get access to capital.   The Regulation Crowdfunding rules may allow investments to happen which otherwise wouldn’t, which is what Congress intended by passing the JOBS Act to modernize the antiquated securities laws.  Companies that can attract accredited investors will likely continue to rely on the private placement exemption under Rule 506(b) due to its relative simplicity compared to other offerings. But again, I do think the Regulation Crowdfunding rules have a specific subset of issuers that can benefit from them.

Is your Trademark License Agreement really a Franchise Agreement? In New York the answer is “Yes”

Most companies licensing the use of their trademarks would not think that a simple license agreement, which provides nothing more than use of the trademark in exchange for a fee, would for legal purposes be treated as a franchise agreement.  But if the trademark licensor is in New York then what it thought was a simple trademark license agreement relationship is likely really a franchise arrangement. Read more

Using “Tested” or “Market” Contract Language

This is a response to a post by Ken Adams of Adams on Drafting.   In one of my earlier posts about the desires of certain clients to have as short a contract as possible, I stated that it was beneficial to draft an agreement a certain way, including certain terms and language, because judges have seen similar items before. Ken identified this and he reiterated his position that a contract drafter should not rely on what he deems “tested” contract language. Read more

Overview of US Privacy Law

One of the current and future hot button legal issues is privacy law.  As technology progresses, how it intertwines with privacy rights is going to be an interesting area.  There are many instances where people knowing and willingly forego certain rights to privacy, like allowing certain apps to track their movements or share certain information with the world.  There are many instances where people give up part of their privacy rights without even knowing it.

There are a host of areas that people in the United States think of as “privacy” rights, some of which are (1) our individual right to choosing to be alone (to not be taped or viewed in private), (2) decisional privacy (right to contraception, access to abortion, right to marry whomever you choose, right to procreate), (3) information privacy (right to not have your information disclosed to third parties), and (4) others. Each of the privacy rights that we hold as individuals may arise from different areas of law including constitutional law, statutory law, agency regulations and even social norms. Read more

SEC’s Final Rules on Regulation Crowdfunding (Finally)

So on October 30, 2015, the SEC adopted final rules which will, after the comment period is done (60) days and they are adopted, allow crowdfunding a/k/a Regulation Crowdfunding a/k/a Equity Crowdfunding in the United States.

At first glance the final rules appear similar to the previously issued versions, with individuals only authorized to invest a portion of their annual salary or net worth through crowdfunding each year.  See the press release here.

Portals which will offer the securities of companies offering same through Regulation Crowdfunding will be effective January 29, 2016 so hopefully a decent number of platforms will be available to start the party in early 2016.

The final rules will be effective 180 days after they are published in the Federal Register. The below is a brief summary in FAQ form covering the Regulation Crowdfunding rules. Read more

New York Qualified Emerging Technology Company (QETC) Incentives

If your company operates in New York and meets the definition of a “qualified emerging technology company” (a “QETC”) it is eligible for New York tax credits.  Additionally if you are a New York State taxpayer and interested in investing in a QETC you may be eligible to claim a credit as well. Read more

New York State Manufacturer’s Real Property Tax Credit

If you are a “qualified New York manufacturer” doing business as a corporation and you paid real property taxes (either as the owner or as the lessee) for your business location where you perform the manufacturing activities, you are eligible for the New York State Manufacturer’s Real Property Tax Credit.

The Credit is equal to 20% of the eligible real property taxes paid by the manufacturer each year.   The manufacturer must exclude portions of the owned or leased real property that are not used in the manufacturing activities (such as parking lots, and common areas, etc.).

A “qualified New York manufacturer” is a manufacturer that either (1) has property in New York State of the type described for New York’s investment tax credit under Tax Law section 210.12(b)(i)(A) that has an adjusted basis for federal income tax purposes of at least $1 million at the end of the tax year, or (2) has all its real and personal property in New York State.