Articles Posted in Corporations

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AdobeStock_252763744-300x200In November 2020, California voters approved what is arguably the most comprehensive privacy rights law in the nation. The California Privacy Rights Act does not take effect until January 1, 2023. But its requirements are far-reaching, and California business owners have a lot of work to do to prepare their businesses for compliance with the law before that date. Moreover, violations of the new Act prior to 2023 can cause bad public relations and potential liability in other areas. Business owners should meet with a California lawyer now to determine how the new law will affect their business, what steps must be taken, and the most efficient process for implementing these measures as soon as possible. The sooner these changes are integrated into a company’s practices and culture, the less likely it is the business will face liability under the Act.

Corporate Responsibilities Under the California Privacy Rights Act

The CPRA requires businesses to track an entirely new category of user data: “sensitive personal information.” This includes government-issued identifiers, finance information, biometric data, health status, precise geolocation, contents of emails or texts, and race or ethnic origin. Sensitive personal information is a subcategory of personal information that is protected under existing privacy laws. This means that it, too, must be de-identified or subject to an aggregation exception. The CPRA adds an additional requirement for businesses to implement “reasonable security measures” to protect personal information. What measures are “reasonable” will be determined by the type of information that is collected. Detailed financial or medical records will likely require higher levels of security than basic demographic information. Retention periods must also be updated to meet only what is reasonably necessary to perform the purposes for which the data was collected. This means that sensitive personal information might have a shorter retention policy than more general personal information.

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AdobeStock_168271721-300x200Most business owners are aware that they must comply with minimum wage laws. However, what is less well known is that there can be different regulations made by a state, county, or even a municipal government. Even more confusing is that these regulations can change, and the changes can take effect at different times of the year. Working with a Silicon Valley business lawyer ensures your compliance with all current wage laws and prevents costly employment disputes in the future.

State Minimum Wage Changes

The California state legislature sets the state minimum wage. The wage policy is frequently reviewed, with annual changes generally taking effect on January 1 of the next calendar year. California’s statewide minimum wage is currently $13 per hour for employers with 26 or more employees and $12 per hour for employers with 25 or fewer employees. According to the Department of Industrial Relations, California law currently requires an increase in the minimum wage every year, making it important for employers to check every annual change in order to keep current with their legal obligations.

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AdobeStock_74836089-300x200A corporation can be formed under the laws of any state, so long as the business and its owners qualify for business entity status. Many business owners use these laws to find a state that offers the most tax and legal advantages. (This is why so many businesses incorporate in the state of Delaware.) But it is important to understand that California law can still apply to your business even if it was formed out of state. Be sure to consult with a California business lawyer about the implications of California law upon your business entity.

What is the Pseudo-Foreign California Corporation Statute?

Section 2115 of the California Corporation Code applies to foreign corporations that have connections to California and satisfy the applicable statutory tests. If both of the following tests are met, the corporation is considered “pseudo foreign,” and it is treated as if it had been incorporated in California in the first place.

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AdobeStock_170886507-300x200Corporate bylaws are an important tool for ensuring the efficient operation of any business and helping to avoid internal conflicts, such as those relating to founder, director, officer and shareholder conflicts. Not all businesses are required to have corporate bylaws, but it is always a good idea to commit your business plans to writing and take advantage of California corporate law. Bylaws can reduce the opportunities for disputes between owners, shareholders, and corporate officers, which can cost time and money that most startup businesses do not have to spare.

Corporate Officers

Most corporate bylaws establish corporate officer positions. These are usually “c-suite” titles, such as Chief Executive Officer, Chief Operating Officer, Chief Technology Officer, Chief Financial Officer, and similar roles. Your corporate bylaws should clearly state what roles will be created, how they will be filled, and what the scope of responsibility is for each officer. You should also provide a process for arbitrating disputes between officers and replacing officers as needed.

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AdobeStock_303475806-300x200Though privately held companies cannot offer stock for sale to the general public, they can offer stock and stock options to owners, executives, and key employees. Doing so can incentivize critical personnel to perform at high levels and stay with the organization. That said, it is important to be sure that your company structures these incentive options effectively. An experienced business lawyer can help you protect your corporate interests while also providing incentives to your personnel.

Executive Compensation

In today’s current employment market, most executives have a compensation package that consists of stock or stock options, at least in part. This gives executives an incentive to make the company profitable and produce the best possible results throughout their employment.

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AdobeStock_330926552-300x203We are beginning to see hopeful signs about the ongoing COVID-19 crisis, and the conversation about when and how to reopen the U.S. economy is beginning in earnest.  In the meantime, however, the restrictions remain in effect.  What can businesses do to try to increase their odds of surviving the crisis?

  • Assess all costs and expenses to determine if any costs can be eliminated or delayed. Cut back or cut out expenses that are entirely within your control to adjust.  Where you don’t have the right to cut back, speak with vendors to see if they will agree to temporarily modify terms, perhaps in return for longer terms or other compromises.  Evaluate force majeure provisions to see if the coronavirus pandemic might provide grounds to terminate or renegotiate unfavorable agreements.  Determine if any counterparties are failing to perform under your agreements, and if such nonperformance might allow you to terminate or renegotiate those agreements. Weigh the potential long term costs and potential short term benefits of breaching agreements.  Note renewal and expiration dates of all agreements.  Discuss all of these potential actions with an attorney to make sure that you fully understand the potential risk of taking any of these measures.
  • Review existing lines of credit and other sources of cash, and consider drawing down on those lines in full to increase cash reserves. Speak with existing creditors about potentially delaying payments or other forbearance.
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FFCRA-300x200The Family First Coronavirus Response Act (FFCRA) includes an expansion of both the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA).  The FFCRA is in part designed to combat negative effects of COVID-19 on the workforce.  The Act includes providing qualifying employers (under 500 employees) with certain incentives and tax credits to offset the cost of providing employee paid sick-leave for COVID-19 related reasons.

The US Department of Labor’s Wage and Hour Division is responsible for administering these portions of the FFCRA and is promulgating regulations to implement same to assist working families facing public health emergencies arising out of the pandemic.  The provisions are set to expire on December 31, 2020 and therefore the rules are (currently) effective starting April 1, 2020 through the end of the current year, 2020.

The Department, in addition to issuing rules and providing direction for administration of EPSLA (which requires certain employers provide up to 80 hours of paid sick leave under certain conditions), has stated the following qualifying conditions for assistance:

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AdobeStock_327922973-300x200Don’t let a data security issue become a public relations nightmare for your enterprise.  Huge gains in efficiency and productivity are in the cards for any enterprise that can keep pace with technology.  However, with any technological advance, risks and pitfalls are abound.  Especially when it comes to Data Security.  Indeed, many have already succumbed to these pitfalls; think healthcare agencies, credit reporting agencies, and even the US Government (remember Edward Snowden?).  Considering most businesses and industries are currently in some form of lock-down, Data Security and Data Security Practices are crucial.  If your enterprise is fortunate enough to have remote work capability and your current Data Security practices are somewhat lacking, consider these basic tips for our current COVID-19 Era.

  • Learn from your prior mistakes. It is said we can learn much more form our failures compared to our successes.  If your organization has already been the victim of a Data Security issue, hopefully you have already implemented practices to prevent the same occurrence in the future.  Continually revisiting your Data Security practices is important in many respects, to name just a few:  1) It serves to minimize future occurrences, 2) It serves to reinforce your polices, 3) It demonstrates the importance of the issue to your workforce, and 4) It could serve to cut-off (or at least limit) liability/damages in the event of a failure.  Make regular review of your practices a priority.
  • Limit who has access. Does everyone in your organization need access to all your critical systems and information?  Probably not.  Considering who needs access, and what information they need access to, is an important consideration.
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AdobeStock_328389408-300x183In the wake of the COVID-19 pandemic, the U.S. federal government passed the CARES Act, a $2 trillion stimulus package aimed at softening the economic distress suffered by American businesses and individuals.  The massive stimulus package authorizes up to $349 billion in forgivable loans through the Paycheck Protection Program to help small businesses pay their employees during the COVID-19 crisis.

When can you apply?

Starting Friday, April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other specified expenses through Small Business Administration (SBA) lenders.  Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive similar loans.

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Covid-19-Adobe-Stock-Photo-300x171In response to the unprecedented challenges presented by the Coronavirus pandemic, several Federal and State laws have been passed to assist businesses during these difficult times.  Some cities have enacted ordinances, and certain companies have announced programs to assist their customers in dealing with the impact of the COVID-19 virus.  These programs include:

Federal Programs

  • The Paycheck Protection Program
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