2017 PREDICTIONS FOR CORPORATE LAW
December 12, 2016
By Jeff Wolfe
Every year as we approach the holidays, business tends to do one of two things: (1) slow down as people slip away for well-deserved and overdue vacations, or (2) as is usually the case, speed up as business owners rush to close transactions by the end of the year and prepare for initiatives to implement in the upcoming year. In either case, December usually provides good insight about what lies ahead in the following year.
Based on what I’m seeing clients focus on at the end of 2016 and as we plan for 2017, I see movement in many areas of the business world, including crowdfunding and opportunities for transitioning Baby Boomer businesses to new owners. And with the incoming Trump administration featuring Cabinet-level positions filled with folks light on government experience but heavy on business success, there will clearly be some sort of governmental/regulatory change for our clients. Here are three of my predictions:
Equity crowdfunding finally sees momentum
I think that 2017 will be a year that equity (and debt and other “securities”) crowdfunding, and specifically Regulation Crowdfunding which fully came online in May 2016, will finally gain momentum to boost the small business and startup communities. Progress in the crowdfunding world has been so slow since the passage of the JOBS Act in 2012 that I would have laughed at this prediction in the past few years. However, I’ve had the recent pleasure of working with a client on a federal Regulation Crowdfunding campaign, and I have realized that while not for everyone, this financing method can be a great fundraising tool for companies that already have a crowd or a business model that can quickly gather one.
According to Forbes, in the first six months of legal Regulation Crowdfunding, investors poured nearly $25 million into 49 successful offerings around the country. While not earth-shattering numbers, it does sound like proof of concept to me, and I think we should expect more rounds in 2017 as the market rewards companies that are suitable for these offerings and investors get comfortable with the securities and terms being offered to them.
Further greasing the skids on crowdfunding in North Carolina in 2017 will be North Carolina’s intrastate exemption, which was adopted into law in July 2016 and doubles the funding limit in these offerings to $2 million over 12 months. We’re still waiting on the final rules for this exemption, but providing more alternatives to more companies should further move the needle on crowdfunded equity and debt offerings.
SBOs looking for the exits will increase
We’ve been hearing for years the many effects on our economy that will be related to Baby Boomers exiting the work force and entering retirement and the impact on business isn’t immune. Think about how many Baby Boomers you know who own a small business. The youngest Boomers are now in their late sixties, and according to a recent Inc.com article, two-thirds of US companies are owned by Baby Boomers.
There are two ways to look at this business transition phenomenon. Obviously, there will be a record number of business owners looking for their successors, whether they are family members, employees, or people currently outside the business. Conversely, there’s a rather unprecedented opportunity for younger generations looking to invest in successful, sustainable companies and take the reins of the small business economy.
Whether you’re on the buy-side or sell-side, finding the exit or taking the leap requires keen preparation. If you’re getting into succession planning, as my colleague David Morris recently illustrated, you’re in for a long, sometimes arduous process full of many considerations that must align the needs of your business with those of your family and estate. As a buyer, you’ll need to perform careful due diligence to find the business opportunity that’s a good match for your skills as an owner and has good management and employees in place post-transition.
The Trump Administration’s policies will affect your business
You’ll notice I didn’t say positive or negative in that little sub-headline above. The positivity or negativity of the Trump administration’s regulation and de-regulation of certain aspects of business could provide you with a windfall, a headache, or both. That’s the nature of regulation, isn’t it—there are few, if any rules that allow us to have our cakes and eat them, too, at all times.
But we can be sure some things will change. For example, you may have read my colleague Leslie Lasher’s recent piece on a Texas judge staying the Obama Department of Labor’s new overtime rule, which would have seen millions of workers previously exempt from receiving overtime pay have their wages increase for compliance. Trump, conversely, has nominated a DOL secretary on the record against the new rule, whether it survives the court challenge or not. Thus, it’s a safe bet that something closer to the status quo on overtime will prevail in the new administration.
Regardless of the positive or negative nature of any change, the point from where I stand as a business attorney is that we must be especially vigilant for our clients whenever a big shift occurs in the government. One of the aspects of my work that I enjoy is helping clients meet the challenges presented by laws that may affect them from fundraising, employment, and other perspectives.
I look forward to working with our clients in 2017, as together we address changes that inevitably come with each new year, as well as new economic and regulatory factors coming to the fore.