As all of our clients’ businesses have suddenly moved from “ordinary course” to “remote” modes, we, the business attorneys at McNaul, are seeing some early patterns and common challenges. Here are a few general observations and tips:
- Real Time Contract Turnaround. Turn critical or desirable inbound and outbound contracts quickly, preferably in real time. You shouldn’t assume your counterparty will have the same staffing or availability next week as they do this week, or tomorrow as they might today. Consider upcoming auto-renewal triggers carefully, and revisit termination and force majeure clauses in existing contracts. (We at McNaul are set up remotely and can help existing clients in real time as needs or questions arise.)
- De Facto Changes to Privacy and Security. Most businesses have third parties woven into the stack of their security and privacy safeguards. If you have business associates or other vendors who go missing, or whose own shifts to remote working compromise your protocols, try to at least identify where ToS, privacy policies, and privacy and security compliance may be implicated. (Again, clients, please ping us or give us a call if we can support you as issues arise.)
- New Workforce Intake. Counter to the broader national trend, many of our clients are hiring or adding contractors to deal with supporting jumps in user traffic and sales. This is great, but while you’re remote, don’t let new staffing fall through the cracks vis a vis work for hire agreements, IP assignments, NDAs, etc., as appropriate.
- Paycheck Protection Program. Whether you are adding, furloughing, or laying off employees you hope to later rehire, look into the federal government's program to incentivize small businesses (i.e., businesses with 500 employees or less) to keep their employees engaged. The concept is: take a loan backed by the government: use it to fund payroll, benefits, utilities and office rent; and to the extent the funds are in fact so used, eligible amounts of the loan will be forgiven. “Affiliation” rules in the law, as currently written, will make most venture-backed companies ineligible, because you’ll have to count the employees of other ventures in your VCs’ portfolio; but there are efforts to eliminate or revise the affiliation rules in that regard.
- Review Insurance Coverage. Virtually all of our clients maintain some form of insurance and may have coverage under various types of policies for business interruption or other losses and liabilities. While the pandemic is causing substantial losses that may not have been previously contemplated, a careful review of your insurance policies, and particularly any endorsements you may have added, may reveal coverage that you did not know you have.
- Bridge Note Terms. Clients who were in the middle of equity financing rounds, or were planning them for this Spring or Summer, know such rounds won’t happen as planned, and valuations are being hammered. Consider raising an inside bridge round instead, using convertible notes. (Clients, we can consult with you on investment terms we are seeing investors request for such bridge loans.)