Welcome to the AMM Law Blog, a tool to help you keep up to date on current legal developments over the broad spectrum of our practice areas. We welcome your comments and suggestions to create a dynamic forum that will be of interest to readers and participants.
Nobody wants a “Bad Actor” as part of its working group but, from the perspective of the founder of a startup, the Securities and Exchange Commission’s proposed “bad actor” rules may wind up causing more injury than antidote. The good news is that the SEC is proposing amendments to its rules to implement Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to disqualify securities offerings involving certain “felons and other ‘bad actors’” from reliance on the safe harbor from Securities Act registration provided by Rule 506 of Regulation D. See 17 CFR Parts 230 and 239 (Release No.33-9211; File No. S7-21-11. I agree with that effort but, since Rule 506 is one of the three exemptive rules for limited and private offerings under Regulation D, and by far the most popular, it is important that the definitions are carefully tailored. Not all “disqualifying acts” are equal, and “covered persons” and the “bad actor” disqualification should apply only to issuer’s management and controlling equity holders rather than any holder of 10% or more of the entity’s equity. And, even if those changes are not made, the reasonable investigation standard for determining whether “covered persons” are “bad actors” should be no more onerous than the current standard for accepting money from “accredited investors”. Without these changes to the proposed rules, the process of compliance will be beyond the budget and timeline of most startups.
We’ve all heard of someone who hit the Enter key too quickly and sent an email he later regretted sending. Unfortunately, in some cases, the result is that the correspondents are deemed to have entered into a contract, without a formal writing and even in the face of evidence that the parties intended to later sign a formal contract. That was the case a few years ago when counsel for Amazon.com sent a one-word reply (“Correct”) to an email from opposing counsel outlining several specific terms of a settlement of a lawsuit. A Pennsylvania court faced a similar case in 2006, when it enforced an unsigned settlement agreement between Commerce Bank and First Union National Bank after concluding that the signing of the agreement was a mere formality since the parties had already evidenced their intent to be bound.
A company’s customer lists, price lists, marketing strategies, and other trade secrets are vital to its success. A smart business owner will ensure that key employees sign non-disclosure and non-compete agreements to protect the business if the employee leaves and takes a job with a competitor. But what if the company is sold? Does the buyer enjoy the benefits of the restrictive covenants contained in the selling company’s employment agreements? The answer is “it depends.” In Pennsylvania, if the purchase is structured as an asset purchase transaction, the buyer does not receive the benefit of the restrictive covenants contained in the seller’s agreements with its employees unless those agreements specifically state that the covenants are assignable. This is because these covenants are viewed as trade restraints that impair a former employee’s ability to earn a living and therefore are interpreted as narrowly as possible to protect the employer’s legitimate business interest.
The legal maze can be overwhelming and daunting but our goal is to demystify the process with our blog. At AMM, we provide legal services to both businesses and individuals. The topics selected are timely legal headliners as well as general issues our attorneys face in our diverse areas of practice. The blog represents only the authors’ opinions and perspectives and we hope to provide useful information and tips addressing your concerns—for businesses and individuals. We welcome your comments and suggestions to create a dynamic forum that will be of interest to readers and participants.
The information contained in this blog is for educational purposes only and is not to be construed as legal advice. Legal advice must be tailored to the specific circumstances of each case. Further, nothing in this blog should be construed as creating an attorney-client relationship. It is not intended to be a full and exhaustive explanation of the law in any area. The law is complex and is subject to change and varying interpretations. This information is not intended as legal advice and may not be used as legal advice. It should not be used to replace the advice of your own legal counsel. Please consult with your own legal counsel regarding the state of the