CONTRIBUTED BY
Trent Dykes and Kerra Melvin

Selling your company can be an exciting and overwhelming process. In addition to the complexity of negotiating the terms of your merger or asset sale, you will inevitably be bombarded with tons of deal-related jargon. Enter one such term, Internal Revenue Code (IRC) Section 280G (280G) or the “golden parachute payment” rules, a federal tax provision that comes into play when there is a change in control of a corporation. 280G impacts both the corporate entity and its executives, shareholders, and other “highly compensated individuals” associated with the corporation and imposes harsh tax consequences if not properly addressed. This post will provide a high-level summary of 280G, discuss when 280G applies, ways to avoid 280G liability, and how to calculate individual tax liability (under IRC § 4999) if 280G does apply.…

Continue Reading Understanding Section 280G and Golden Parachute Payments

Article prepared by and republished courtesy of our colleagues Jeffrey Hare, John Clarke, John Sullivan, and Adam Dubin; originally published here: https://www.dlapiper.com/en/insights/publications/2023/03/buying-assets-from-the-fdic

In the wake of the appointment of the Federal Deposit Insurance Corporation (FDIC) as receiver for Silicon Valley Bank (SVB) and Signature Bank (SB) on March 10 and March 12, respectively, investors may be considering whether there will be opportunities to acquire failed bank assets. This alert provides a high-level overview of the process for acquiring assets from the FDIC as receiver.

Overview

An FDIC insured bank fails when the chartering regulator closes the bank and appoints the FDIC as receiver. Upon its appointment, the FDIC as receiver succeeds by operation of law to all of the assets and liabilities of the bank, ensuring that depositors have access to their insured deposits. To address potential systemic risk arising from the failures of SVB and SB, federal authorities determined that the SVB and SB receiverships would each be handled “in a manner that fully protects all depositors.” The Deposit Insurance Fund (DIF) overseen by the FDIC absorbs the costs of covered deposits. The DIF is funded mainly through quarterly assessments on all insured banks.…

Continue Reading Buying assets from the FDIC

Article prepared by and republished courtesy of our colleagues Richard Marks, Kevin Criddle, Curtis Mo, and Jeffrey Lehrer; originally published here: https://www.dlapiper.com/en/insights/publications/2023/03/applying-the-lessons-of-the-svb-and-signature-bank-failures

The failures of Silicon Valley Bank and Signature Bank sent many companies into credit and liquidity crises. With the most pressing short-term impacts now stabilized, corporate boards and management should consider steps to be better prepared in the future.

What happened

On March 10, 2023, Silicon Valley Bank (SVB) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. Two days later, New York regulators stepped in to close Signature Bank under the same structure. On March 12, 2023, the Federal Reserve, FDIC and Treasury Department jointly announced an emergency program to backstop all deposits at both SVB and Signature Bank.…

Continue Reading Applying the lessons of the SVB and Signature Bank failures: Steps for boards and management

Article prepared by and republished courtesy of our colleagues Jeffrey Hare, Margo Tank, Christopher Steelman, David Whitaker, and Adam Dubin; originally published here: https://www.dlapiper.com/en-us/insights/publications/2023/03/takeaways-from-the-silicon-valley-bank-and-signature-bank-receiverships

On Friday, March 10, 2023, Silicon Valley Bank (SVB) was closed by its chartering regulator, the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (FDIC) was appointed as receiver which is typical for a bank receivership. The FDIC formed Deposit Insurance National Bank of Santa Clara (DINB) (chartered by the Office of the Comptroller of the Currency) and immediately transferred to DINB all insured deposits of SVB. No loans or other products were transferred to DINB nor were uninsured deposits.…

Continue Reading Takeaways from the Silicon Valley Bank and Signature Bank receiverships

Article prepared by and republished courtesy of our colleague Brooke Goodlett; originally published here: https://www.dlapiperaccelerate.com/knowledge/2020/texas-cracks-down-on-cryptocurrency-fraud.html 

Texas continues to be a leader in the United States when it comes to cracking down on fraudulent cryptocurrency offerings, and the novel COVID-19 virus has not curtailed these efforts. In 2017, the Texas State Securities Board (the TSSB) became the first state securities regulator to issue a cease-and-desist order against a promoter of a cryptocurrency investment scheme. The TSSB has since issued 26 administrative orders involving 79 individuals and entities for illegally, fraudulently or deceptively offering cryptocurrency investments to Texas investors. The circumstances underlying these enforcement actions have numerous commonalities – promises of high returns, irreplaceable losses, commissions for recruiting new investors and the omission of pertinent information.
Continue Reading Texas cracks down on cryptocurrency fraud: 2020 developments

Article prepared by and republished courtesy of our colleagues Larry W. Nishnick, Bradley E. Phipps, Kevin R. Bettsteller, Brittney Bennett and David Kurlander; originally published here:  https://www.dlapiper.com/en/us/insights/publications/2020/09/sec-adopts-changes-to-accredited-investor-definition/

The SEC recently adopted amendments to the long-standing definition of “accredited investor,” an important qualification standard under the securities laws that determines what types of investors may invest in certain kinds of private securities offerings, including securities offerings to natural persons and entities conducted pursuant to Rules 506(b) and 506(c) of Regulation D under the Securities Act of 1933 and “qualified institutional buyers” for Rule 144A under the Securities Act and other important federal and state securities law exemptions.  The final rule adopted by the SEC is substantially similar to the proposed rule with a few teaks based on comments it received as part of the adoption process.…

Continue Reading SEC adopts changes to “accredited investor” definition

Choosing the right lawyer for your startup can be overwhelming, given the important role that relationship will play in the evolution of your company. However, finding the right fit at the earliest stages can save you lots of pain (and cost) down the road. Accordingly, I thought it would be helpful to share my observations on how to optimize the selection process and ensure a strong long-term relationship with your lawyer.

While all of the below considerations are obviously important, in my experience, individual founders put different weight on each…
Continue Reading How to Choose Your Startup Lawyer

Article prepared by and republished courtesy of our colleagues Christine Daya, Thomas M DeButts, Danish Hamid, Sarah E. Kahn, Richard Newcomb, Ignacio E. Sanchez, Lawrence E. Levinson and Dana Zelman; originally published here: https://www.dlapiper.com/en/us/insights/publications/2020/01/new-regulations-reinforce-cfius-expanded-role/.

On January 13, 2020, the US Department of the Treasury released two sets of new regulations that comprehensively implement the Foreign Investment Risk Review Modernization Act (FIRRMA) – a law that strengthens the authority of the Committee on Foreign Investment in the United States (CFIUS). CFIUS is an interagency committee chaired by the Secretary of the Treasury and is responsible for screening foreign investments into the United States to determine if they could impair US national security. The new CFIUS regulations will become effective on February 13, 2020 and are titled (i) Provisions Pertaining to Certain Investments in the United States by Foreign Persons (31 CFR Parts 800 and 801) and (ii) Provisions Pertaining to Certain Transactions by Foreign Persons Involving Real Estate in the United States (31 CFR Part 802).  These CFIUS regulations reflect the Treasury Department’s response to comments provided after its issuance of certain proposed rules in September 2019, as described in our previous alert. Among various developments, the new regulations:…
Continue Reading New regulations reinforce CFIUS’s expanded role with respect to foreign investments in the US

Just a reminder to those who have Delaware corporations: your annual report and franchise tax payment are both due by March 1 (which is a Sunday, so plan accordingly). At this point, you have likely already received from Delaware your notification of annual report and franchise tax due, which is sent to a corporation’s registered agent in December or January of each year. Delaware requires these reports to be filed electronically.

There are two methods that you can use to calculate the amount of Delaware franchise tax due for…
Continue Reading Delaware Franchise Tax due date: a reminder for Delaware corporations

Article prepared by and republished courtesy of our colleagues Larry W. Nishnick, Bradley E. Phipps, and David Kurlander; originally published here: https://www.dlapiper.com/en/asiapacific/insights/publications/2020/01/sec-proposes-changes-to-accredited-investor-definition/.

The SEC recently proposed amendments to the long-standing definition of “accredited investor,” an important qualification standard under the securities laws that determines what types of investors may invest in certain kinds of private securities offerings, including securities offerings conducted pursuant to Rules 506(b) and 506(c) of Regulation D under the Securities Act of 1933 and other important federal and state securities law exemptions.

The current definition of “accredited investor” has been in place without any significant update since 1985. At a high level, the proposal would expand the number of natural person investors that qualify by adding categories of eligibility based on their professional knowledge, experience or certifications. The proposal would also expand the types of entities that qualify as “accredited investors.” The proposed changes would allow additional persons and entities to qualify as “accredited investors,” thereby allowing them to purchase securities through private offerings, including shares and interests in certain private investments funds.

Notable changes…
Continue Reading SEC proposes changes to “accredited investor” definition

Although entrepreneurs and venture investors typically drive the negotiation of the term sheet for a venture financing, once the term sheet is executed, the commercial parties (especially those who have not been through the process many times) often feel sidelined in the ensuing process to close and uncomfortable with their lack of visibility into and control over the timeline. Accordingly, I thought it would be helpful to provide a high-level overview of a standard venture financing timeline.
Continue Reading How Long Should it Take to Close my Venture Financing?