The new SEC rules lifting the ban on general solicitation and general advertising in certain private offerings go into effect today, September 23, 2013. Beginning today, issuers in Rule 506 offerings may generally solicit investors and advertise their offerings provided they take reasonable measures to ensure that each purchaser is an accredited investor. The new
PE Funds Could be Liable for Certain Portfolio Company Pension Obligations
Sun Capital Partners was dealt a harsh blow by the United States Court of Appeals for the First Circuit in a recent decision where the court found that this private equity fund could be held liable for the pension withdrawal liability of its portfolio companies. The court essentially
espoused the view of the Pension Benefit
General Solicitation Ban Lifted from Rule 506 Private Offerings, But Issuers Must Verify all Purchasers are Accredited
The SEC on July 10 finally lifted its 80-year old ban on general solicitation and general advertising in Rule 506 offerings, as Congress directed it to do last year in the JOBS Act. When the new rules go into effect in September, issuers will be able to use social media, the internet, blogs, email and
Convertible Valuation Caps: Loved by Angels, Tolerated by VCs and Hated by Entrepreneurs
I’ve noticed a recent trend of angel investors demanding valuation caps on their convertible bridge loans, and I’ve received questions lately from startup and VC clients about them. So I thought this would be an opportune time to explain what 
all the fuss is about.
First, the basics.
Convertible Notes
A convertible note evidences a
SEC Report on Small Business Capital Reform
Last month, the SEC released its Final Report on the 2012 SEC Government-Business Forum on Small Business Capital Formation, the SEC’s annual forum to address perceived unnecessary impediments to small business capital formation. Participants typically include small business executives, VCs, government officials, trade association representatives, lawyers, accountants, academics and small business advocates. The Report contains
Tax Me Now: Founder Stock and the 83(b) Election
Of the countless details and decisions that the founder of a startup company is inevitably juggling as he launches his startup, one of the most important is making a timely Section 83(b) election. Under Section 83 of the Internal Revenue Code, an employee is not taxed on restricted stock received from an employer as
SEC “Likes” Social Media Disclosure, So Long as Investors are Alerted
On July 3, 2012, Netflix CEO Reed Hastings kicked off the holiday weekend with some fireworks of his own by posting on his personal Facebook page that Netflix had streamed a billion hours of content in the month of June. Hastings designated the post as “public,” making it available to anyone on the Internet, including
New York Emerges as Tech Powerhouse
Farrell Fritz and our Emerging Companies and Venture Capital Practice Group are proud to launch the New York Venture Hub blog, a resource for entrepreneurs, emerging companies, the investors who invest in them and the professionals who serve them. This is an exciting time for the innovation ecosystem, with renewed legislative and regulatory efforts to reform capital markets to make it easier for private companies to raise capital and for small companies to go public. There has also been a proliferation of regional efforts to accelerate the commercialization of home-grown technologies through university spinouts and other technology transfer arrangements with local job creating companies. Accelerate Long Island is one such initiative, created to promote the local commercialization of inventions produced at Long Island’s world-renowned research institutions. Farrell Fritz has been playing, and will continue to play, a key role in this effort. Just across the East River (or literally, on it), Cornell University and Technion are building a world-class applied engineering campus on Roosevelt Island that is predicted to result in the creation of 600 spinouts over the next three decades. Farrell Fritz believes that technology innovation will transform our economy nationally and regionally, and we hope the New York Venture Hub blog will prove to be a useful resource to the developing innovation ecosystem. We invite you to link to our blog.
New York Emerges as Tech Powerhouse
Continue Reading New York Emerges as Tech Powerhouse
Startups’ Guide to JOBS Act
In perhaps the only successful bipartisanship effort in 2012 to remove barriers to economic growth, Congress passed and the President signed on April 5, 2012 the most comprehensive set of laws to facilitate small company capital raising since the Federal securities laws were first enacted in the 1930s. In a nutshell, the JOBS Act (acronym for the Jumpstart Our Business Startups Act) creates an on-ramp for small company IPOs, removes the prohibition on general solicitation and advertising from the most commonly used private offering, creates a new equity crowdfunding exemption, sharply raises the cap for the small company offering exemption under Regulation A from $5 million to $50 million in any 12-month period and significantly raises the shareholder number trigger for Exchange Act registration. Some provisions are immediately effective, but others require SEC rulemaking.
Continue Reading Startups’ Guide to JOBS Act
Risks In Using Unregistered Finders To Find Capital
Using finders, instead of investment bankers that are registered broker-dealers, involves significant risks that could threaten a company’s ability to successfully raise capital now and in the future.
The biggest risk is that if the finder is deemed to be an unregistered broker-dealer, under federal and some state securities laws an investor may have the