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Andrew M. Piper

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Andrew Piper is a member of Gunster’s Tax and Securities & Corporate Governance Practice Groups.  Andrew advises public and private companies on matters involving securities laws and regulations, corporate governance issues and practices, as well as mergers and acquisitions.  He also represents clients in personal and business tax-related matters.

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Remind me again, what’s Section 162(m)?

Image by Gerd Altmann from Pixabay

In general, Section 162(m) of the Internal Revenue Code provides that a publicly held corporation shall not be allowed a deduction for any “applicable employee remuneration” to any “covered employee” that exceeds $1,000,000.  Applicable employee remuneration generally means compensation for services performed.  Though the definition has changed over time, “covered employee” originally captured a company’s CEO as of the last day of the taxable year, as well as the next three most highly compensated officers.

Insert the TCJA

The Tax Cuts and Jobs Act of 2017 (the “TCJA”) took the first stab at widening the net used to determine who is a “covered employee.”  Specifically, the definition was expanded to include any person who served as CEO or CFO during the taxable year, in addition to the next three most highly compensated officers.  Additionally, the definition was expanded to include any individual who was a “covered employee” for any taxable year beginning after December 31, 2016.  The TCJA also made other notable changes to Section 162(m), including the elimination of an exception for qualified “performance-based compensation” approved by stockholders.  The practical effect of this was to eliminate the need for stockholder votes to approve plans providing for “performance-based” compensation, because the compensation in question would be non-deductible whether or not it was performance-based.
Continue Reading Run for “Covered!” The American Rescue Plan Act casts a wider net on Section 162(m) “Covered Employees”

Image by Gerd Altmann from Pixabay

How did we get here?

On September 11, 2020, the SEC adopted new rules to “update and expand the statistical disclosures” that bank holding companies, banks, savings and loan holding companies, and savings and loan associations are required to provide to investors. The old regime – Industry Guide 3, “Statistical Disclosure by Bank Holding Companies” – had not been meaningfully updated for more than 30 years.  There have been all sorts of developments since then, including new accounting standards, a financial crisis, and new disclosure requirements imposed by banking agencies. So it’s not surprising that the SEC began questioning the need to make changes to Industry Guide 3, requesting comments in 2017 and again with a proposed rule in September 2019.

So, what’s new?

The changes were implemented in part to eliminate overlaps with disclosures already required under SEC rules, U.S. GAAP, and International Financial Reporting Standards (“IFRS”), as well as to incorporate new accounting standards. Under the new rules, disclosures are required for each annual period presented (as well as any additional interim period should a material change in the information or trend occur), aligning these disclosures with the annual periods for financial statements.
Continue Reading Out with the old, in with the new: Banks and S&Ls must now provide updated and expanded statistical disclosures

On December 19, 2018, the SEC adopted final rules allowing reporting companies to rely on the Regulation A exemption.

How did we get here?

The SEC adopted a new – and greatly improved – Regulation A, known as Reg A+, in 2015.  As noted in previous posts (see here and here) Reg A, provides an exemption from registration under the Securities Act for smaller public offerings, but for many years was seldom used due to cost restraints and small financing caps.  The 2015 amendments, adopted in response to the JOBS Act, remedied these shortcomings, updating Reg A to make it a more viable capital-raising tool.

The main benefits of Reg A+ include the following:

  • Companies can raise up to $50 million every 12 months via two overlapping tiers.
    • Tier 1: offerings of up to $20 million in a 12-month period.
    • Tier 2: offerings of up to $50 million in a 12-month period.
  • Insiders can sell their shares in a Reg A+ offering.
  • Investors in a Reg A+ offering have immediate liquidity – they can sell their shares once the offering is completed and don’t have to hold them for a period of time.
  • Some Reg A+ offerings are exempt from state securities or “blue sky” laws.
  • Some Reg A+ offerings are easier to list on an exchange.
  • Reg A+ can be used for merger and acquisition transactions.

What’s new?
Continue Reading Hip, hip, Reg A! — Reporting companies can now use Reg A+ and may find it a viable capital raising alternative

Photo by Martin Fisch
Photo by Martin Fisch

When you think of corporations, you think “maximize profits for shareholders”. This notion is being turned on its head as a growing sustainable business movement asks: “Can we look to factors in addition to profit to measure a company’s success?” More than thirty U.S. states and the District of Columbia have answered “yes” by authorizing a benefit corporation, or “B Corp” – a for-profit corporate entity, but one that seeks to positively impact society, the community, or the environment, in addition to generating profit. The concept is catching on internationally as well, with Italy the first country outside the U.S. to pass benefit corporation legislation.

Tell me more

Benefit corporations fundamentally alter how a company is allowed to act. While the laws on benefit corporations differ around the country, model legislation is available. B Corps not only seek to create shareholder value, but also must balance social purpose, transparency, and accountability. A B Corp’s purpose is also to create general public benefit — for instance, a material positive impact on society or the environment. B Corps must publish annual benefit reports, made against an independent third-party standard, of their social and environmental performance, and often must file these reports with the Secretary of State. The benefit report includes a description of how the company pursed its benefit, hindrances faced in pursuing such benefit, and the reasons for choosing the specific third-party standard. For example, a company with an environmental purpose may choose to report against the standards set forth by the Global Reporting Initiative. Additionally, shareholders have a private right of action known as a benefit enforcement proceeding, in which they can seek to enforce the company’s mission.

In Florida, a B Corp’s articles of incorporation must state that the corporation is a benefit corporation to incorporate as such. Further, an existing corporation may amend its articles of incorporation to become a benefit corporation. Likewise, a corporation may terminate its benefit status via amendment of its articles of incorporation by a two-thirds vote of shareholders. The law is similar for social purpose corporations (discussed later). B Corp status may provide more options on the sale of the company: (1) buyer competition increased based on the company’s commitment to public benefit, as compared to other potential targets without such a reputational distinction; (2) the seller can consider other factors besides price; and (3) the buyer or seller can keep/remove benefit corporation status immediately before/after sale based on the new owner’s perspective regarding the benefits of B Corp status.

“To ‘B’ or Not To ‘B’?”

There is growing demand for B Corps from: (1) consumers wanting to buy responsibly; (2) employees seeking meaningful jobs; and (3) communities dealing with corporate misconduct. While these
Continue Reading Don’t stop B-lievin’: A “Journey” into benefit corporations