COVID-19 induced declines in private and public company valuations have left many employee stock options “underwater” or “out-of-the-money”, i.e., exercise prices exceeding fair market value. This is a problem for employees and companies alike. Underwater options no longer serve their retention and incentivization objective, but nevertheless use up finite authorized shares and count against authorized capital and option plan caps. Consequently, companies should seriously consider restoring financial incentives by either repricing or exchanging the underwater options. This…

Among the many challenges companies are facing during the COVID-19 pandemic is how to conduct their shareholder meetings. Current social distancing requirements are effectively forcing companies to choose between postponing meetings and conducting them virtually. This requires careful attention to state executive orders, the relevant corporate statute, the company’s certificate of incorporation and by-laws, as well as SEC rules and recent guidance in the case of public companies. Several states, including New York and Delaware,…

Venture-backed companies did not receive the relief they had hoped for this past Friday, April 3rd, when the Small Business Administration (“SBA”) issued affiliation rule guidance on the Paycheck Protection Program (“PPP”) created under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The guidance largely affirms existing SBA regulations as they previously applied to SBA 7(a) loans and includes no affiliation rule waiver other than the limited waivers in the CARES Act.…

Public companies stressing over how to meet filing deadlines during the COVID-19 crisis and what to say about the pandemic’s impact just received a filing reprieve and disclosure guidance from the SEC. The Securities and Exchange Commission issued an order on March 25, 2020 conditionally extending the deadlines for certain public company filings under the federal securities laws. On the same day, the staff of the SEC’s Division of Corporation Finance issued guidance on disclosure…

It’s not often that an SEC Commissioner quotes Bruce Springsteen – not once, but twice – in a speech on securities regulation. But SEC Commissioner Hester Peirce did just that in a February 6, 2020 speech in which she unveiled her novel proposal for a digital asset safe harbor. The proposal would create a three-year securities regulatory grace period during which digital network developers could distribute digital tokens while building a decentralized or functional network,…

The Securities and Exchange Commission is proposing to expand the definition of “accredited investor” to include additional entities that could bear the economic risks of investment and certain financially sophisticated persons irrespective of income or wealth. The Commission’s main objective is to identify more effectively institutional and individual investors that have the knowledge and expertise to participate in private capital markets and thus do not need the protections of registration.  If adopted, the proposed expansion…

On September 30, 2019, the Securities and Exchange Commission announced that blockchain developer Block.one had agreed to pay a $24 million fine to settle charges that it had engaged in an unregistered offering of securities in violation of Section 5 of the Securities Act.  The announcement set off a mini-firestorm of criticism in the crypto community because the $24 million penalty seemed disproportionately small relative to the $4 billion it raised in its ICO and relative…