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Dec. 2012

December 2012
From the Colorado Bar Association
Business Law Section

Ed Naylor, Editor
To view pdf of this newsletter, click here.
In this issue...

Five Reasons to Become an Active Member of the Colorado Bar Association

By Deanna Lee Westfall, Business Law Section Chair, Managing Bankruptcy Attorney at Castle Stawiarski, LLC

[This article is directed primarily to new attorneys, but if you are an experienced attorney who has not been active in the Bar, this is for you too!]

As you start your practice, you will be faced with many new challenges. First, there really are only 24 hours in the day. Second, if you are fortunate enough to have a legal job, your employer would like you to commit the first 23 hours each day to them. Meanwhile, you desire to have some balance in your life. Finally, the Bar Association keeps asking you to join.

Your time at the Bar Association is not billable. It is not guaranteed to lead to a better job offer or new clients. However, it is one of the most valuable investments you can make in your career. In no specific order, here are my five top reasons for being active in the Colorado Bar Association:

  1. Networking: My favorite part about being an active member of the Bar is networking. I used to think networking meant meeting people and figuring out how they could help me in my professional career. While that is still part of networking, I have embraced a larger definition that includes finding ways to spend time with amazing people and, sometimes, improve our society along the way.
  2. Opportunities: Many of my relationships that were started at the Colorado Bar Association offices have led to opportunities. These opportunities have often been unpaid, such as serving on a committee, writing an article, or teaching a seminar. In addition to aiding in my education and professional development, these opportunities have been incredibly enjoyable.
  3. Resources: Because I have served in many roles at the Bar Association, I now know attorneys who are experts in diverse areas of practice who return my phone calls willingly. When I don’t know who to call, the Bar Association will provide me with names of experts who are likely to be willing to discuss a novel legal issue with me.
  4. Legislative Collaboration: I spend time with smart, caring people working on important issues that affect all Coloradans. The attorneys who serve on the various Bar committees check their personal politics at the door and work hard to obtain results that provide real benefits to Colorado.
  5. Continuing Education: I started attending Bankruptcy Subsection meetings because I learned a lot at the case law updates, without much effort. I also met a lot of people who were also interested in bankruptcy. I continue to learn from case law updates, meetings, and sponsored lectures. Learning in a social, interactive setting is more enjoyable and more interesting than reading cases in my office.
  6. A Bonus—Sense of Satisfaction and Fulfillment: When I reflect upon my experiences as a lawyer, many of the most fulfilling happened at Bar Association functions. Practicing law is hard, but it can also be satisfying. For me, the Bar Association is a place to reach beyond the day to day practice and engage in the greater legal community.

I highly recommend taking the time to attend Bar functions and find your own niche in the Colorado Bar Association. There is room for all of us.

If you would like to join the CBA or the Business Law Section, you can send an email to membership@cobar.org or go to http://www.cobar.org/index.cfm/ID/767/dpmem/Membership-Applications/.
You can also contact Jill Lafrenz to become more involved in the Section.

General Solicitation Under The JOBS Act: Will It Ever Occur?

By Herrick K. Lidstone, Jr., Burns, Figa & Will, P.C.

As I wrote in the April 2012 Business Law Section Newsletter, on April 5, President Obama signed the “Jumpstart Our Business Startups Act” (H.R. 3606; the “JOBS Act”). This was intended to be a bipartisan effort to ease burdens on capital formation by start-up companies. One of the most anticipated provisions of the JOBS Act is in Title II, “Access to Capital for Job Creators.” Section 201(a)(1) required the Securities and Exchange Commission (SEC) to revise Rule 502(c) of Regulation D to permit general solicitation in Rule 506 offerings provided that the purchasers of the securities are accredited investors.

As set forth in Title II and existing Regulation D, the rules to be adopted by the SEC must have two principal components:

  1. The issuer of the securities offered must “take reasonable steps to verify that such purchasers of the securities are accredited investors” using such methods as the SEC may determine; and
  2. The investors must be accredited investors, or at least the issuer must reasonably believe that the investors are accredited investors.

Thus, without the “reasonable steps” required by paragraph (i), the exemption would not be available even if all investors were accredited. (Similar changes will be made to Rule 144A, a trading exemption for qualified institutional buyers. § 201(a)(2) of the JOBS Act).

The JOBS Act expressed Congress’ intention that this new exemption be implemented swiftly and efficiently and that final rules be adopted by July 5, 2012. Instead, that process has dragged on for many months, and remains in limbo as the year winds to a close. The SEC did not even announce the rule proposal (Rel. 33-9354) until Aug. 29, 2012, it received more than 200 public comments, and a number of senators have criticized the entire concept of the rule. The critics included seven Democratic senators who, in an Oct. 12 comment to the rule proposal, criticized the proposal as being fatally flawed because it failed to establish the required “reasonable steps” and opens the door to fraudulent schemes. On Dec. 3, the Wall Street Journal reported that outgoing SEC Chair Mary Shapiro has decided to delay implementation of general solicitation under Rule 506 and punt to her successor “over [her] legacy concerns.” (The article is at page C-1 and is entitled “SEC Chief Delayed Rule Over Legacy Concerns.”) Since after her resignation the SEC will consist of two Democrats and two Republicans who disagree on some fundamental aspects of the rule, further delays are likely.

The most incendiary question is how to vet accredited investors (the “reasonable steps” required by Title II) and whether it is the SEC’s obligation to define those steps. As reported by the Wall Street Journal article, the supporters are claiming that the implementation of general solicitation is “critical to capital formation and the growth of small enterprise” and should be implemented quickly without excessive regulation. As expressed in a Nov. 20 letter directly to Chair Shapiro from Congressmen Scott Garrett, Kevin McCarthy, and Patrick McHenry, many who are nervous about excessive regulation would prefer to keep things on something like an honor system basis, governed merely by the rule of caveat emptor.

Section 926 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, (H.R. 4173, the “Dodd-Frank Act”) required that the SEC adopt rules to prevent “bad boys” from utilizing Rule 506 (similar to the restrictions in Regulation A and Rules 504 and 505). The SEC proposed that rule (entitled “Disqualification of Felons and Other ‘Bad Actors’ from Rule 506 Offerings”) in May 2011, but it has gone no further since then. Clearly that rule will have an impact on the “general solicitation of accredited investors” under Rule 506. SEC Commissioner Luis Aguilar has said recently that he does not believe that the Commission will address the general solicitation rule any further until it first adopts a rule to meet that Dodd-Frank Act requirement.

The SEC’s approach to this rulemaking effort is an interesting contrast to the SEC’s rule making after the Dodd-Frank mandated a tightening of the definition of “accredited investor.” Section 413 of the Dodd-Frank Act required the SEC to adjust the definition of “accredited investor” in Rule 501(a) so that, for natural persons, the net worth calculation specifically excludes the value of the person’s primary residence, and it made the legislative determination effective immediately. Within two days the SEC issued a Compliance and Disclosure Interpretation (CDI 179.01 and CDI 255.47) to explain CorpFin’s interpretation of Section 413(a). The results: different rules, different emphasis (protection of investors by the Dodd-Frank Act; capital formation under the JOBS Act), and different statutory mandate (immediate effectiveness versus SEC rulemaking).

Whether and when the SEC will address the comments received on the general solicitation rule proposal and issue a revised proposal, final rules, or even an interim final rule, is up for speculation. Issuers should not hold their breath. In the meantime, the rules regarding solicitation of accredited investors for a private placement offering under Rule 506 or otherwise are based on rules adopted long before the Internet became as useful as it is today, and strict compliance is still important.

Business Law Section Activities
Financial Institutions Subsection

Lunch and Learn Returns in January

The Financial Institutions Subsection Lunch and Learn is back, beginning Wednesday, Jan. 16 with “Turn-Around Lending—Case Studies.” The program, presented by Keith D. Palesh, Regional Manager and Executive Vice President of Wells Fargo Capital Finance, will present case studies involving turn-around lending with the intent of providing industry perspectives on strategies, common problems which arise with turn-around lending, liquidation issues, and the need for such lending.

The live program will be in the CBA-CLE Large Classroom, 1900 Grant Street, Suite 300, Denver, CO, and also available via webcast. Same-day registration will begin at 11:30, followed by the program from noon to 1 p.m.

Click here for complete details and to register.

UCC Article 9 Security Interests: Collateral Refresher and Hot Topics—Wednesday, March 6

Mark your calendars! The Financial Institutions Subsection is sponsoring a half-day CLE related to UCC Article 9 Security Interests. Topics for this program will include a summary of the categories and types of collateral covered under Article 9, filing and searching for security interests, and UCC security interest opinions.

The live program will be held at the CBA-CLE Classroom, 1900 Grant Street, Suite 300, Denver, CO or via webcast, from 8:30 a.m. to 12:15 p.m. Four general CLE credits available.

Click here for more information and to register.

M&A Subsection

M&A Breakfast CLE Series—Tuesday, Feb. 5—Save the Date!

More information to come. Please check the CBA-CLE website in the coming weeks for additional topics and complete information on the class.

CBA-CLE Information

2013 National CLE Conference® in Snowmass—Bankruptcy Track—Jan. 2–5

All presentations are live, and feature some of the best lawyers, judges and professors from throughout the country. Our early morning and late afternoon schedule provides 12–16 hours of continuing legal education credit per program, while at the same time allowing ample time to enjoy Snowmass. A few of the topics to be covered in the sessions include the latest and greatest (or not) case law developments, mortgage issues, legal ethics, and fraudulent conveyances.

Call 303-860-0608 (toll free 888-860-2531) or click here to view the agenda and register.

Using the iPad in a Law Practice—Tuesday, Jan. 11—Two half-day programs or one full-day program available.

Morning Program: Introduction and iPad Basics
Whether you’re new to the iPad or whether you’ve been using it for years, you’ll find this morning seminar tremendously useful. We will take a quick tour of the iPad and walk through a “day-in-the-life” of an iPad-using lawyer. We will cover the must-have apps that should be on every lawyer's iPad and tackle important security settings and how-to’s on loading documents and printing.

Afternoon Program: Advanced iPad Topics
Now that you’re familiar with the basics of your iPad, it’s time to dig a little deeper. How can you do legal research on the iPad? How do you give a presentation on the iPad? Do you need to buy a keyboard or stylus? We’ll answer all these questions and many more as we discuss and demonstrate the professional tasks that can be accomplished on the iPad. This will be a hands-on event, so bring your iPad and be ready to learn how to get the most out of it.

Click here to register and get more information on the morning program only. Click here to register and get more information on the afternoon program only. For the full-day program, click here.

Limited Liability Companies in Colorado—Tuesday, Feb. 26, 8:45 a.m.–5 p.m.

Regardless of your practice, you need to know and understand limited liability companies. Issues involving this flexible and common form of business entity arise in litigation, transactions, estate, business and tax planning, real estate development, and beyond. Learn the ins and outs of LLC formation, best drafting practices, rights and obligations, duties, creditors’ rights and more from seasoned professionals, Herrick Lidstone and Allen Sparkman.

Call 303-860-0608 (toll free 888-860-2531) or click here for more information and to register.

Advising Small Companies—Wednesday, Feb. 27

At this all-day program, you will learn the most common issues that arise for your small business clients—what business entity to choose upon formation of the business, how to negotiate contracts, prevalent employment law concerns, and what intellectual property issues to watch out for.

Call 303-860-0608 (toll free 888-860-2531) or click here for more information and to register.

CBA-CLE Featured Publications

Practitioner’s Guide to Colorado Business Organizations, Second Edition

Managing Editors: Allen Rozansky and Lee Reichert

The Guide begins with basic topics that a Colorado practitioner should consider in the choice-of-entity process. The book then presents detailed discussions of the numerous types of Colorado entities. The 2012 supplement includes substantive updates to 21 of the 34 chapters in the book. Some of these updates are significant, including updates for Federal regulations and statutes, and Secretary of State filing and website changes. The exhibits in many of these chapters contain updated sample forms, documents, and charts.

For more information or to order the book, call 303.860.0608 or 800.860.2531 or click here.

Contributions for future newsletters are welcome –
Contact Ed Naylor at ed.naylor@moyewhite.com or 303-292-2900

This newsletter is for information only and does not provide legal advice.

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