Five Common Equity Incentive Plan Mistakes

By Sebastian Lucier

Equity Incentive Plans (aka, Stock Option Plans) are a standard feature in nearly every start-up.  Although the basic concept (granting an equity interest to an employee or other service provider) is simple enough, there are a few administrative and legal technicalities that need to be respected.  Below is a list of five common mistakes that start-ups make when administering their Equity Incentive Plans.

You’ve Got Mail! Emails May Be Subject to Stockholder Books and Records Requests

By Zachary Liebnick and Zane Polston

Delaware corporations have always been required to provide certain information to their stockholders under Section 220 of the Delaware General Corporation Law (DGCL), but the scope and form of that information  has naturally changed as technology advances.  A recent expansion of the type of documents that corporations may be required to provide occurred in a recent case in which the Delaware Supreme Court held in KT4 Partners LLC v. Palantir Technologies, Inc., that a corporation may be required to produce emails and other electronically stored records at the request of stockholders who bring books and records requests under Section 220.

Why You Need Proprietary Information and Inventions Assignment Agreements

By Daniel Marden

Protecting your company’s intellectual property rights is essential during all stages of your company’s growth.  One of the first steps you can take to protect your company’s intellectual property rights is to have all advisors, consultants, contractors and employees of your company enter into Proprietary Information and Inventions Assignment Agreements (“PIIAs”), also known as Confidential Information and Inventions Assignment Agreements. 

The California Consumer Privacy Law is Here. Get Prepared. (Webinar)

By Cynthia Larose and Brian Lam

This webinar provides an overview of the act including who it applies to, the types of data covered, and the new rights granted by the act such as data access, deletion, and portability. Actionable, business-focused advice is provided regarding preparing data inventories and process flows to support these new rights, as well as business model considerations in light of the act’s guidance on data monetization and the sanctions and remedies that companies may face. 

Employers Beware: Judge Greenlights Employee’s Privacy Lawsuit Over Dropbox Access

By Katharine BeattieCynthia LaroseJennifer Budoff

Many employers maintain policies limiting their employees’ expectation of privacy in the workplace, including policies that eliminate any expectation of privacy when using company-issued electronic devices. While employers may think that having such a policy would protect them from invasion of privacy claims under the Fourth Amendment or state law, a recent federal court decision may cause employers to think otherwise. This post examines this decision and provides best practices for avoiding issues with employees’ privacy interests.

Musical.ly’s COPPA Failure Falls Flat at the FTC; Will Pay Note-Worthy Fine

By Cynthia LaroseElana Safner

The Federal Trade Commission (“FTC”) has handed down its largest civil penalty ever for violations of the Children’s Online Privacy Protection Act (“COPPA”). Musical.ly, now known as TikTok after a 2018 merger, agreed to a fine of $5.7 million for its violations. The settlement was significant not only because of its record amount, but also because it includes a specific agreement on how the website will operate going forward.

California’s Privacy Act—Watch for an Expanding Private Right of Action

By Joshua BrionesEsteban MoralesMatthew Novian

The California Consumer Privacy Act takes effect on January 1, 2020, but amendments are expected. In an article recently published by Bloomberg Law, Mintz attorneys Joshua Briones, Esteban Morales and Matthew Novian discuss the April 9 hearing on SB-561, a bill that would expand the private right of action and remove compliance opportunities for businesses, and explain why the bill should be closely watched.

The Impact Terms Project: Defining the Standard for Impact

By Verna Krishnamurthy

The Impact Terms Project (“ITP”) was launched as a platform intended to provide guidance on best practices to entrepreneurs, investors and other stakeholders in the rapidly-evolving social enterprise space. To this end, the ITP covers a broad range of topics from corporate formation and financing to exit terms, building a foundation of resources on “what’s market” for those involved in impact. The ITP’s effort to build institutional knowledge in the space not only better enables entrepreneurs to tackle the complex questions that arise in the formation and growth of impact-driven businesses, but also help establish a framework of knowledge on impact investing for potential investors.

What Startups Should Know About the California Consumer Privacy Act

By Brian Lam

Privacy and data security is a serious concern for many startups.  They understand that end users, consumers, partners, and investors are now concerned like never before about how data is collected, used, stored and transferred.  A bad data event quickly turns into a bad news story, can turn off users, discourage investors, and bring regulatory scrutiny and enforcement. 

The SEC Confirms the Limited Scope and Nature of Utility Tokens

By Marine Bouaziz and Daniel DeWolf

On April 3, 2019, Finhub, the SEC’s Strategic Hub for Innovation and Financial Technology, released the “Framework for ‘Investment Contract’ analysis of digital assets” (the “Framework”) providing principles for analyzing whether a digital asset[1] constitutes an investment contract, and thus a security. The same day, the SEC’s Division of Corporation Finance (the “Division”) published its first No-Action Letter on digital tokens. The No-Action Letter applies the Framework to a digital asset created by Turnkey Jet, Inc. (“Turnkey Jet”), a company that provides interstate air charter services.

10 Shortcuts Entrepreneurs Should Not Take When Starting a Company

By Robert Giachetti and Mark Higgins

Congratulations - you have done it!  You had an idea, you built a product, you figured out how you want to go to market, and you created a company.  With that tedious process complete, you are ready to find your first customer, iron the bugs out of your product, and start making money.

How to Distribute Equity in Your Start-Up

By Patrick Elahmadie

One of the most difficult decisions entrepreneurs face when planning the growth of their start-up is determining how to distribute equity among the founders, the current (and/or future) management team and other employees and consultants. There is no one-size-fits-all model for determining to whom to give equity and how much to give them: this process requires an in-depth look at a number of factors pertaining to the company, generally, and the recipient of the equity, specifically. 

CAUTION: Director Veto Rights in Financing Documents May Constitute “Disproportionate Voting”

By Lewis Geffen and Soobin Kim

Section 141(d) of the Delaware General Corporations Law (DGCL) allows the certificate of incorporation (COI) of a Delaware corporation to confer upon one or more directors voting powers greater than or less than those of other directors, thus resulting in “disproportionate voting” rights amongst the Directors.  When VC funds, their portfolio companies and VC lawyers read or think about DGCL 141(d) and this disproportionate voting, they usually, and narrowly, have in mind only the question of whether certain directors may have more than or less than one vote per Director on matters voted on by the Board, or a committee of the Board. 

How To Get Started: Dividing Equity, Getting Incorporated and Other Details When Beginning Your Business!

By Dinesh Melwani and Will Perkins

Posted on Medium (Nov. 8, 2018)

Just about every emerging business/start-up lawyer could write a book (and many have!) on the topics of equity division, incorporation and the innumerable ‘other details’ founders need to keep in mind when starting a business! We think you can only properly address these issues with any specificity in a face-to-face or phone-to-phone conversation and, with that in mind, this writing focuses instead on some high level concepts and discussion points to cover with fellow founders in advance of your first sit-down with corporate legal counsel — a meeting we strongly recommend (and which, dare I say, many firms (big and small) will offer at no charge)!

LLCs and Convertible Debt – Too Good to be True?

By Scott Pinarchick and Will Bussiere

Founders choosing a structure for their business are often drawn to the limited liability company, or LLC, for its overall flexibility in both taxation and governance matters. And founders seeking access to early capital, not to mention seed investors themselves, are often drawn to the convertible note as a simple, less expensive means to raise funds. But LLCs and convertible debt don’t always mix.

Digital Tokens: Rethinking the Term “Cryptocurrency”

By Daniel DeWolf, Rachel Gholston, and Marine Bouaziz

What are the similarities between a one dollar bill, a share of a company, and a pre-paid gift card? The answer is……..not so much! The same is true of the similarities between virtual currencies, security tokens, and utility tokens; in truth, not so much. Yet, if you follow the world of digital tokens in the media and popular press, you would think that virtual currencies, security tokens, and utility tokens are all very similar because they are often concurrently and interchangeably discussed under the topic of “cryptocurrency.”