As businesses attempt to navigate the post-COVID-19 landscape, one issue of concern is the possibility of claims for alleged COVID-19 exposure being brought by both customers and employees. These concerns have been complicated by the often conflicting guidance or requirements being placed on businesses from local, state, and federal governments or agencies. While there is ongoing discussion at the federal level of legislation to provide some liability protections for businesses in certain circumstances, several states are stepping into the void and enacting legislation of their own. Louisiana has now followed Oklahoma, North Carolina, and several other states in enacting legislation that grants liability protections for businesses from these type of claims.
On June 5, President Trump signed the Paycheck Protection Program Flexibility Act of 2020 (the Flexibility Act). The act revised, in certain important respects, elements of the Paycheck Protection Program (PPP) that had appeared in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as supplemented by a series of interim final rules and FAQs published by the Small Business Administration (SBA). Below is a summary of the changes.
On June 8, 2020, the Federal Reserve Board (Federal Reserve or FRB) announced a number of changes to the terms and conditions for three Main Street Lending Program (MSLP) facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). The Federal Reserve anticipates lender registration to be open in the coming days.
In response to feedback received from industry groups and others, the Federal Reserve made the following changes to the MSLP, which will make the program available to more small and medium-sized businesses:
- Reducing the minimum loan size for the MSNLF and MSPLF from $500,000 to $250,000
- Increasing the maximum loan size for all facilities
- Increasing the term of each loan option from four to five years
- Deferring the initial principal payments for two years, rather than one
- Reducing the lenders’ risk retention in the MSPLF from 15% to 5%; as a result, the MSLP special purpose vehicle will purchase a 95% participation in qualifying loans under all three facilities
On May 27, 2020, the Federal Reserve Bank of Boston (FRBB) released the legal forms and agreements for eligible borrowers and eligible lenders to participate in the Main Street Lending Program (MSLP). The FRBB also published updated Frequently Asked Questions (FAQs), which include numerous new questions and answers regarding eligibility, loan terms and conditions, borrower certifications and covenants, regulatory requirements and reporting, and other issues.
On April 30, 2020, the Federal Reserve Board (Federal Reserve) had issued the terms and conditions for three MSLP facilities: the Main Street New Loan Facility (MSNLF), the Main Street Priority Loan Facility (MSPLF), and the Main Street Expanded Loan Facility (MSELF). Copies of all documents can be found on the FRBB’s Main Street Lending Program Forms and Agreements webpage.
In the May 27 release, the term sheets for the three MSLP facilities were not amended from the forms released on April 30, and the definitions of “Eligible Borrower” and “Eligible Lender” remain unchanged. An overview and summary of the previously issued term sheets, including eligible borrower and eligible lender requirements, can be found here. A list of covenants and commitments required to be made by eligible borrowers and lenders — including compliance with the CARES Act’s compensation, stock repurchase, and capital distribution restrictions — is also detailed.
Although the MSLP has not yet been launched, the documents, checklists, and revised guidance issued on May 27 appear to be final, subject to future Federal Reserve interpretation and refinement. Accordingly, eligible borrowers and eligible lenders should review the available guidance and documentation, and address potential issues surrounding the facilities’ terms and conditions with their counsel now. We expect that the Federal Reserve and FRBB will announce the program start date in the coming days.
On Friday, May 22, 2020, the Small Business Administration (SBA) released two new Interim Final Rules (collectively, the Rules) governing Paycheck Protection Program (PPP) loans: (1) the Loan Forgiveness Requirements (Forgiveness Rule) and (2) the SBA Loan Review Procedures and Related Borrower and Lender Responsibilities (Lender Responsibility Rule). These Rules provide lenders of PPP loans (Lenders) some of the first clear answers on their responsibilities with respect to processing PPP Loan Forgiveness Applications, and it is fair to say that those responsibilities likely exceeded what many Lenders expected, much less desired. This memorandum summarizes the requirements and procedures the new Rules place on Lenders for reviewing PPP loans and Loan Forgiveness Applications, and suggests some unanswered questions raised by them.
On May 14, 2020, the Securities and Exchange Commission (SEC) approved the request by the Nasdaq Stock Market (NASDAQ) to delay until September 1, 2020, the implementation of a recently adopted rule that will accelerate the delisting process for listed companies (i) with securities in a minimum bid price compliance period (as described below) with bid prices at or below $0.10 or (ii) that have fallen below the minimum bid price after completing one or more reverse stock splits with a ratio of 250 shares (or more) to one over the prior two years.
NASDAQ’s continued listing rules require that a company’s listed equity securities maintain a minimum closing bid price of at least $1.00 per share. A NASDAQ-listed company is noncompliant with this listing standard when the bid price for its listed security closes below $1.00 for 30 consecutive business days. Generally, after becoming noncompliant, a NASDAQ-listed company has a period during which it can regain compliance.
In accordance with emergency powers granted in the wake of the COVID-19 pandemic, the Internal Revenue Service (IRS) and US Department of Labor (DOL) recently issued guidance temporarily extending a number of benefit plan-related deadlines and providing other relief for participants and plan sponsors having difficulty complying with these requirements during the COVID-19 pandemic. Below is a summary of the guidance, which is posted in the Employee Benefits Resources Section.
DOL and IRS Final Rule
The May 4, 2020, Final Rule generally suspends certain benefit plan deadlines for the duration of the “Outbreak Period,” which is an open-ended period beginning March 1, 2020, and ending 60 days after the end of the COVID-19 national emergency. The relief under the Final Rule is generally aimed at participants and beneficiaries, and mostly affects group health plans.
As we slowly begin the long process of returning to our offices, it will be very important to have a clearly defined and organized approach to identify upcoming deadlines and document important changes to our core businesses. Please join the Jones Walker SALT team as we discuss these practical issues, including specific steps to take, business changes to document, tax reduction opportunities to pursue, and some unique approaches to resolve existing state tax issues and controversies.
When: Wednesday, June 3, 2020 | 12:00 – 1:15 p.m. CDT
Registration Details: Registration is complimentary.
Questions or to Register: Please contact Courtney Farley at email@example.com.
This program is intended for intermediate to advanced practitioners in state and local tax administration and those doing business in Louisiana, Mississippi, Texas, and along the Gulf Coast.
On May 14, 2020, the Securities and Exchange Commission (SEC) approved the New York Stock Exchange’s (NYSE) request to make additional temporary modifications to certain shareholder approval requirements during the COVID-19 pandemic, which are similar to recent modifications made by the Nasdaq Stock Market (NASDAQ) (previously summarized here).
Together with the NYSE’s prior temporary relief (previously summarized here), these additional temporary modifications to the shareholder approval requirements are intended to enhance NYSE-listed companies’ access to capital during the COVID-19 pandemic. The NYSE’s and the NASDAQ’s temporary relief from the shareholder approval requirements are now closely aligned through June 30, 2020.
The Paycheck Protection Program (PPP) presents various risks to banks, including litigation from customers, prospective customers, and third parties, as well as enforcement actions from the government and bank regulatory agencies.
An analysis of the several dozen lawsuits filed in the months after the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act reveals that PPP litigation is trending in five preliminary categories: PPP eligibility restrictions, PPP loan prioritization, agent fees, default on debt, and False Claims Act, each detailed below with other litigation risks.
The PPP also presents regulatory risk to banks, including but not limited to nonpayment of guarantee by the US Small Business Administration (SBA), fair lending risk, Bank Secrecy Act (BSA) compliance risk, and PPP compliance risk, each detailed below.