Federal Trade Commission Implements Annual Adjustments to Hart-Scott-Rodino Notification Thresholds

February 23, 2022 | Comments Off on Federal Trade Commission Implements Annual Adjustments to Hart-Scott-Rodino Notification Thresholds
Posted by Craig P. Ismaili

Co-Authored by John L. Sikora

The Federal Trade Commission (“FTC”)’s adjusted notification thresholds for the Hart-Scott-Rodino Anti-Trust Improvement Act of 1976 (“HSR Act”) for 2022 have gone into effect beginning February 23, 2022. The “size of the transaction” thresholds have increased to $101 million (from $92 million) and $403.9 million (from $368 million), and the “size of the person” thresholds have increased to $20.2 million (from $18.4 million) and $202 million (from $184 million). The new thresholds apply to transactions that close on or after February 23, 2022, while the prior “size of the transaction” and “size of the person” thresholds will apply to transactions closing before February 23, 2022.

The HSR Act requires the parties to a merger or other M&A transaction to file a notification of the transaction with the FTC and the Department of Justice (“DOJ”) if the transaction meets the “size of the transaction” test and the parties meet the “size of the person” test. These dollar threshold are adjusted annually based on changes to the United States gross domestic product.

Notification is required if (a) the transaction is valued at more than $403.9 million, regardless of the size of the parties; or (b) a transaction is valued at more than $101 million, but not more than $403.9 million, and, generally, one party has total assets or annual net sales of at least $20.2 million and the other party has total assets or annual net sales of at least $202 million. Read more


Maximize Compliance ROI: the Tailored Compliance Check-Up

September 10, 2021 | Comments Off on Maximize Compliance ROI: the Tailored Compliance Check-Up
Posted by Jay Cohen

Introduction
Sensible strategies and practical plans to advance regulatory compliance are not just for the biggest companies. Mid-sized and even smaller companies have rules to follow and regulators to persuade; employees and customers to reassure; lenders, insurers and investors to satisfy. No company can afford to come up short.

Addressing these imperatives need not be expensive or intrusive to succeed. Instead, a tailored “compliance check-up” will:

    1. Create a company-specific compliance risk profile – based on the company’s business model, markets, geography, customers, regulators and other factors. This risk profile will reflect industry-specific requirements, as well as the most relevant regulations of more general application, such as employment rules.
    2. Assist management in identifying any gaps in managing the highest-priority compliance issues and risks within that risk profile;
    3. Evaluate how the company’s existing processes, resources and data can better contribute to managing these issues/risks – Every organization has elements of an effective compliance program, and an experienced eye can provide advice as to how these elements can work together in an efficient whole;
    4. Develop the right plan, in collaboration with business leadership, to close the gaps and strengthen the company’s regulatory compliance; and
    5. Provide on-going support as needed – for as long or as little as required.

Read more


Remote Only Shareholder Meetings Now Permitted During a State of Emergency Under the Amended New Jersey Business Corporation Act

May 26, 2020 | Comments Off on Remote Only Shareholder Meetings Now Permitted During a State of Emergency Under the Amended New Jersey Business Corporation Act
Posted by Steven L. Shur

On March 20, 2020, Phil Murphy, the Governor of New Jersey, signed into law an amendment to the New Jersey Business Corporation Act to permit corporations organized in New Jersey to conduct shareholder meetings solely by means of remote communication.  This change assists corporations planning to hold shareholder meetings during COVID-19 as the prior version of Section 14A:5-1 only permitted remote meetings so long as a location for shareholders to attend the meeting in-person was also designated. All such remote only shareholder meetings may only be held during a state of emergency declared by the Governor provided, that the board of directors authorizes and adopts guidelines and procedures governing the remote only shareholder meeting.

Prior to holding a remote shareholder meeting, whether or not the Governor has declared a state of emergency, a New Jersey corporation must review its certificate of incorporation and by-laws to confirm that remote participation by shareholders is not restricted or prohibited. If remote shareholder meetings are restricted, consideration should be given as to whether amendments to such documents are necessary prior to proceeding with the remote meeting. Read more


New Jersey Department of Revenue and Enterprise Services Announces Streamlined Business Reinstatement and Dissolution Program

January 9, 2020 | Comments Off on New Jersey Department of Revenue and Enterprise Services Announces Streamlined Business Reinstatement and Dissolution Program
Posted by Patrick Convery

On December 10, 2019, the New Jersey Division of Revenue and Enterprise Services announced that it is introducing a Streamlined Business Reinstatement and Dissolution Program that will run from March 1, 2020 through June 15, 2020 to assist companies that have not complied with the Division’s annual reporting requirements and are in revoked status with the State of New Jersey.    Through an on-line self-service procedure being established by the Division, a company will be able to come into compliance and reinstate or dissolve without a requirement to obtain tax clearance, for a flat $500 fee plus a convenience or credit card fee, so long as the company attests that the company has paid all known New Jersey state tax obligations.  Further details regarding this Program can be found at https://www.state.nj.us/treasury/revenue/pdf/RevNotice-121019.pdf.


FASB 2017-01

July 9, 2018 | Comments Off on FASB 2017-01
Posted by John A. Aiello

The interpretation and application of Financial Accounting Standards Board (FASB) standards is clearly within the domain of the accounting profession and generally does not directly involve lawyers. Yet, lawyers involved in mergers and acquisitions should be aware that the FASB has issued Update No. 2017-01 (the “Update”) to provide guidance on whether a transaction will be accounted for as an acquisition of assets or as an acquisition of a business.

The purpose of this communication is not to analyze or discuss the tests included in the Update for determining whether a transaction will be accounted for as an acquisition of assets or an acquisition of business. Instead, the writer simply wishes to point out that there are certain differences in accounting treatment under the Update that may need to be considered in connection with an acquisition transaction. Specifically, note the following:

• Transaction expenses will be capitalized in an asset acquisition but must be expensed in a transaction to be accounted for as an acquisition of a business or business combination;

• In process research and development is capitalized in an acquisition of a business and expensed in an asset acquisition;

• Contingent consideration is recognized at its acquisition date fair value in a business combination, but an asset acquisition requires that contingent consideration be recognized when the contingency is resolved.


NJ Extends EDA Loan Program to Minority or Women Owned Businesses

January 12, 2018 | Comments Off on NJ Extends EDA Loan Program to Minority or Women Owned Businesses
Posted by Melissa V. Skrocki

Governor Christie signed A1451 into law this week making EDA loans through the Urban Plus Program available to small, minority or women owned businesses located in designated New Jersey regional centers or metropolitan planning areas as if such businesses were located in urban centers.   Minority or woman owned business enterprises (MWBE) must be certified through the Department of Treasury.  As a qualification, MWBE applicants must demonstrate that the business is operated and controlled by a management team of women or minorities and such company is owned by a majority of minorities or women. The business must be involved with a commercially useful function and the minority or female ownership and management must be real, substantial, and continuing and not merely in name only.

GH&C welcomes further discussion with business owners seeking MWBE certification or assistance with EDA loan applications. Inquiries may be made to Melissa V. Skrocki, a partner in our Corporate Department, who has represented a number clients in connection with Minority and Woman Owned Business certifications.


SEC Issues Proposed Rules Requiring Use of Universal Proxy

December 12, 2016 | Comments Off on SEC Issues Proposed Rules Requiring Use of Universal Proxy
Posted by John L. Sikora

The Securities and Exchange Commission has proposed amendments to the federal securities laws that would require use of universal proxies in connection with contested elections of directors.  These universal proxies would include the names of all nominees for election to the board of directors, including both the registrant’s slate of nominees and a dissident party’s nominees.

Under the current regime, the registrant presents its slate of nominees for director in its proxy statement and proxy card that the registrant sends to its shareholders, and the dissident party presents its nominees in its own proxy statement and proxy card.  The federal securities laws do not currently require either the registrant or the dissident party to include the other’s nominees in its own proxy statement and proxy card.  State laws generally prohibit a shareholder from submitting two separate proxy cards, even if the total number of nominees for whom a shareholder votes on two separate proxy cards does not exceed the number of directors to be elected.  Therefore, a shareholder cannot vote for nominees on both the registrant’s proxy card and the dissident’s proxy card unless the shareholder attends the registrant’s annual meeting in person and votes by ballot at the meeting. Read more


Earnout Transactions: The Importance of Providing Post Closing Operating Standards for the Acquired Company

September 6, 2016 | Comments Off on Earnout Transactions: The Importance of Providing Post Closing Operating Standards for the Acquired Company
Posted by John A. Aiello

In the world of mergers and acquisitions, so called “earnout” provisions are sometimes utilized to bridge differences between a seller and a purchaser as to the value of the target company. The purchaser may take the view that it will not pay additional consideration for the target unless the target company performs well over a period post-closing, in which case additional consideration is paid referencing the achievement of an agreed upon metric.

Generally, earnout provisions are not readily accepted by a seller because of the myriad of potential issues that affect the calculation of the additional “earnout” consideration. One such issue is how the business of the target company is conducted post-closing. The purchaser will want complete discretion on how to operate the target or acquired company post-closing and will not want to undertake an obligation to maximize the earnout payment. The seller, on the other hand, is usually quite uncomfortable with allowing the purchaser such complete control. After all, the business may have performed very well prior to the sale and the seller will want the acquired company operated in the ordinary course in accordance with past practice. Horizon Holdings, LLC v. Genmar Holdings, Inc., 244 F. Supp. 2d 1250 Kan. 2003 involves a disputed earnout provision.

Failing to be specific in the purchase agreement about how the acquired company should be operated post-closing when an earnout provision applies is fraught with peril and may very well result in litigation. There are several possible ways to address the issue of how the acquired company will be operated post-closing, some of which have been suggested above. The important point is that the purchase agreement should be very clear on this issue of how the acquired company will operate post closing, and parties involved in an acquisition need to pay as much attention to this issue of post-closing operation as they do to any other aspect of the earnout provision.


SEC Proposes to Expand Qualification for Smaller Reporting Companies

July 22, 2016 | Comments Off on SEC Proposes to Expand Qualification for Smaller Reporting Companies
Posted by John L. Sikora

The Securities and Exchange Commission has proposed to amend the definition of a smaller reporting company to a registrant with either a public float (i.e. the market value of the registrant’s common equity held by non-affiliates) of less than $250 million, or a public float of zero (meaning that all of the registrant’s common equity is held by affiliates) and revenues of less than $100 million in the prior year. However, if a registrant does not initially qualify as a smaller reporting company, the registrant will not be eligible to qualify as a smaller reporting company unless or until the registrant either has a public float of less than $200 million, or a public float of zero and revenues of less than $80 million in the prior year. Under the current rules, a smaller reporting company is defined as a registrant with either a public float of less than $75 million, or a public float of zero and revenues of less than $50 million in the prior year.

Registrants that qualify as smaller reporting companies are eligible to avail themselves of scaled disclosure obligations for their periodic reports and financial statements filed with the SEC. Smaller reporting companies are also not required to provide an independent registered public accounting firm’s attestation report on their internal controls over financial reporting in their annual reports.
The SEC will be accepting comments on the proposed amendments through August 30, 2016.


IRS Clarifies that Partners are not Employees, even in Holding Company Structure

July 22, 2016 | Comments Off on IRS Clarifies that Partners are not Employees, even in Holding Company Structure
Posted by John A. Aiello

Co-authored by John L. Sikora

The Internal Revenue Service recently adopted temporary regulations to clarify that a disregarded entity that is owned by a partnership is not treated as a corporation for purposes of employing the individual partners in the partnership, even if the disregarded entity is otherwise treated as a corporation for employment tax purposes. Rather, the disregarded entity is disregarded as an entity separate from the partnership for purposes of employing the individual partners in the partnership. This means that a partner in a partnership that owns a disregarded entity (such as a limited liability company) that employs the partner, is deemed to be self-employed and is subject to self-employment taxes on the net earnings from the disregarded entity’s activities. Consequently, the partner will not be entitled to participate in certain tax-advantaged employee benefit plans that would otherwise be available to the disregarded entity’s other employees. Read more