A controlled foreign corporation (CFC) is a foreign corporation that is more than 50% owned by shareholders who: (a) are U.S. citizens or residents, domestic entities, or U.S. trusts and estates; and (b) own 10% or more of the foreign corporation’s voting power. Under current law, a pledge of a CFC’s assets in certain loan transactions triggers a deemed distribution to the U.S. shareholders of the CFC for U.S. income tax purposes. This rule applies whether the pledge of the CFC’s assets is direct or indirect, meaning that a pledge of CFC stock could implicate a deemed distribution. Under a safe harbor rule, however, a pledge of less than two-thirds of the CFC’s stock (measured by voting power) will not be considered an indirect pledge of the CFC’s assets.
By: George Morrison
On November 7, 2017, the U.S. House of Representatives passed the Save Local Business Act. While the fate of the legislation is uncertain in the Senate, if passed into law, the Act would substantially rein in the National Labor Relations Board’s (NLRB’s) and Fourth Circuit’s “joint-employer” rules. These rules vastly expanded the circumstances under which businesses could be held jointly liable for workplace violations involving employees of their independent contractors and franchises, as well as contract and temporary employees provided by or through staffing firms.
By: William Hussey
Since the release of Republican tax reform principles on September 27th by the so-called “Big Six,” both the U.S. House of Representatives and Senate have passed budget resolutions which clear a path forward for federal tax reform. As was widely anticipated, the House adopted the Senate budget resolution on October 26, 2017, and thus avoids the need to go to conference to work out the differences between the two chambers’ versions. The now joint resolution allows Congress as a whole to pass tax reform measures along party lines with a simple majority vote. The resolution also allows for tax cut measures to add up to $1.5 trillion to the federal deficit over a decade. However, the details of specific tax reform measures remain shrouded in a fog of ambiguity.
By: Gwenn Barney
As the deadline nears for exchanges to report all stock and option trades to the Consolidated Audit Trail (CAT) database of the Security and Exchange Commission (SEC), calls are increasing for the launch of the planned massive inventory of equity and options markets activity to be delayed.
A federal judge in the Southern District of New York recently issued an opinion providing guidance concerning the viability of data breach claims, particularly in the context of a breach of employee information. Sackin v. Transperfect Global, Inc. involves a purported class action filed on behalf of Transperfect employees whose personally identifiable information (PII) was disclosed as a result of a cyber attack. In January 2017, a targeted phishing email was sent to a Transperfect employee designed to look like it had come from the company’s CEO, requesting payroll information regarding Transperfect employees. The Transperfect employee fell for the scheme and sent unencrypted PII to the attacker including names, addresses, Social Security Numbers, and bank account numbers for Transperfect employees. According to the complaint, the disclosure involved thousands of employees. Read more at Cyber News.
By: Gwenn Barney
The United Kingdom government proposed changes to its rules on mergers and acquisitions this week to give itself more oversight over deals that have national security implications.
The proposed rule will allow the government to intervene in a merger or acquisition involving a UK company with at least £1 million ($1.32 million) in revenue in the industries of military or dual use product design and manufacture, computer chip design, and quantum technology. Prior to this proposal, the turnover threshold for such an intervention was £70 million ($92.21 million) or where the effective market share of the combined business reached 25 percent or more.
By: Michael Psathas
Initial coin offerings, or “ICOs”, have exploded in 2017 and in some cases have led to significant financial returns for speculative investors in the nascent industry. Companies from across the world have raised more than $1.6 billion this year according to CB Insights. However, it has been a challenging month for investors and other stakeholders expecting a laissez-faire regulatory environment both in the United States and abroad. (more…)
Chairman Jay Clayton of the U.S. Securities and Exchange Commission (SEC) announced two new initiatives on September 25, 2017. The Commission has created a Cyber Unit that will focus on cyber-related misconduct and a Retail Strategy Task Force to help protect retail investors.
The announcement concerning the Cyber Unit follows a statement made several days earlier by Chairman Clayton in which he noted that the SEC “is focused on identifying and managing cybersecurity risks and ensuring that market participants – including issuers, intermediaries, investors and government authorities – are actively and effectively engaged in this effort and are appropriately informing investors and other market participants of these risks.” (more…)
When negotiating investments in target companies, a private equity firm will almost assuredly attempt to negotiate the best possible deal for itself and its investors. Any professional that has been a part of such negotiations and transactions understands that in addition to the valuation of the target company and the size of the investment, private equity firms can negotiate director seats, board observer rights, dividends, warrant protection, management services agreements, the right to buy additional securities at a fixed price in the future, and redemption rights. A recent opinion by the Delaware Chancery Court, however, may force some private equity firms to give pause before using their clout over company management to “cash-in” on these negotiated terms. (more…)
Provisions designating the law governing contractual disputes are commonplace. However, designation of the governing law does not necessarily establish the jurisdiction within which the dispute must be decided. Parties who do not appreciate this distinction may be surprised that they cannot litigate their dispute in the jurisdiction they selected for the governing law. (more…)
- Evidence of Lack of Adequate Compliance Systems Sufficient to Plead Bad Faith by Board
- Healthcare Executive Order Suggests Changes Are Coming
- Rules Finalized Permitting Employees to Buy Individual Health Insurance Plans through HRAs
- Delaware Chancery Court Addresses the Seller’s Preservation of Privilege Post-Closing
- Designing Tax Efficient Business Transactions