Bankruptcy/Creditors’ Rights

Client Alert: The CARES Act and the Paycheck Protection Program

March 27, 2020

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was signed into law today allocates $350 billion for a Paycheck Protection Program (“PPP”) meant to provide immediate relief to small businesses (less than 500 employees) and other eligible entities impacted by the COVID-19 pandemic. Process: The process for securing a PPP loan is fairly simple. The law allows Small Business Administration (“SBA”) approved lenders to provide eligible businesses loans of up to $10 million (based on a formula tied to payroll costs) for payroll and other expenses incurred between February 15, 2020 and June 30, 2020. To determine loan eligibility, a lender need only consider whether the borrower was in operation on February 15, 2020 and paid employee salaries and payroll taxes or paid independent contractors. There are separate provisions for new or previously closed businesses. The Act waives fees for both borrowers and lenders. Loan Terms: A borrower is eligible for a loan equal to 2.5 months of regular payroll expenses, capped at $10 million. A borrower does not have to provide a personal guarantee or collateral to get a PPP loan. The loans have a maximum interest rate of 4% and only start to mature following the date the employer applies for loan forgiveness (see below). The loan can have a maximum maturity of ten (10) years from such date. Allowable Uses: Employers can use the funds from loans for (1) Payroll costs; (2) Group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; (3) Employee Salaries, commissions, or similar compensations (up to $100,000) (4) Payments of interest on mortgage obligations; (5) Rent (including rent under lease agreement); (5) Utilities; and (6) Interest on any other debt obligations incurred before the covered period. Loan Forgiveness: A portion of the loan may be forgiven in an amount equal to payments made on eligible employee payroll costs, interest payments on a covered mortgage obligation, rent, and utility payments made during the first 8-weeks after the origination date of the loan.  Read More

A Guide to Mergers of Nonprofit Entities

2019/12/30

As published in the January/February 2020 issue of The Pennsylvania Lawyer Nonprofits generally consider mergers for a variety of reasons, such as to avoid financial duress, to obtain stronger operational resources or to expand the scope of services. This article explores the statutory mechanisms available to nonprofits considering merger as well as discussion of the fiduciary duties of directors who may be considering a merger. Effects of Merger Section 331 of the Pennsylvania Transactions Law allows for the merger of two domestic (Pennsylvania) nonprofit entities. In such an instance, it is contemplated that Nonprofit 1 (NP1) would remain as the surviving association, with Nonprofit 2 (NP2) as the merged entity. For this to occur, each board of NP2 and NP1 would need to approve of a plan of merger, and a statement of merger would be filed with the Pennsylvania Department of State. Upon filing of the statement, the merger would be complete, and NP2 would no longer exist as a legal entity. Upon the effectiveness of the merger, all property of NP2 would become the property of NP1 (automatically, by operation of law), and all debts, obligations and liabilities of NP2 would be the debts, obligations and liabilities of NP1, without reversion, impairment or transfer. All rights, privileges, immunities and powers of NP2 would be vested in NP1, assuming there is no concern with diverting the charitable purpose of the assets. Effects of Dissolution As an alternative to merger, Section 5972 of the Nonprofit Corporate Law (NCL) allows for a voluntary dissolution of a Pennsylvania nonprofit corporation by the directors and/or members of the corporation. The NP2 board would adopt a resolution that it be voluntarily dissolved. The articles of dissolution would be filed with the Pennsylvania Department of State. NP2 would be able to wind up its affairs either prior to or following the filing of the articles of dissolution. Read More

Firm Newsletter, Winter 2009

January 26, 2009

Articles In This Issue: 1. Understanding Bankruptcy Preference Litigation: And How Best To Avoid It 2. Killing the Messenger? How FASB’s Proposal To Expand A Company’s Obligation to Disclose Litigation Loss Contingencies May Do More Harm Than Good 3. Employers’ Cost-Cutting Measures In Strained Economic Times 4. Changes to Pennsylvania’s Realty Transfer Tax Regulations Have Far-Reaching Effects 5. The Next Gold Rush – The Marcellus Shale Natural Gas Basin 6. It Is Important To Properly Classify A Worker As An Independent Contractor Or An Employee Related Information: Firm Newsletter, Winter 2009 Read More

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