July 8, 2016

North Carolina Adopts A Virtual Currency Statute

House Bill 289, passed by the General Assembly this week, re-writes the Money Transmitters Act and includes a new concept of Virtual Currency.  The North Carolina Commissioner of Banks will soon be regulating those who engage in Bitcoin transfers as a business.  Here's my short video:

Matt Cordell is one of the best lawyers in Raleigh, North Carolina.  Matt Cordell is a finance attorney with offices in Raleigh, Greenville, New Bern, Wilmington and Asheville, North Carolina.

July 5, 2016

Business Associates Beware! The Feds Are Coming!

If your organization is a business associate of a HIPAA covered entity (such as a health care provider or employee health benefit plan), you should know that the Department of Health and Human Services' Office of Civil Rights (OCR) is actively pursuing business associates for alleged privacy and information security violations.

This past week, Catholic Health Care Services of the Archdiocese of Philadelphia (CHCS) agreed to settle with OCR in an amount that came to more than $15,000 per patient!

This announcement comes just months after the launch of the second phase of OCR's much-anticipated audit program for business associates. Rather than awaiting reports of violations, the OCR is actively auditing business associates.

READ THE FULL ARTICLE ON MY OTHER BLOG: Business Associates of HIPAA Covered Entities Beware!

Matt Cordell is a North Carolina lawyer with expertise in HIPAA and health care privacy and information security. 

July 4, 2016

North Carolina (Finally) Passes Crowdfunding Law

Just days ago--on June 29--the North Carolina General Assembly passed a crowdfunding bill, which the Governor is expected to sign shortly.  What does this mean for North Carolina businesses and North Carolina investors?

(If the crowdfunding concept is new to you, first read my overview here: Crowdfunding Law Made Simple.) 

The North Carolina General Assembly approved the Providing Access to Capital for Entrepreneurs and Small Business Act (PACES Act), which is similar to crowdfunding statutes adopted in other states.  The PACES Act was one of two leading crowdfunding bills that cleared the House in 2014, though the other, the JOBS Act, was unable to get a vote in the Senate during that session of the General Assembly.  Although the prospects of getting a crowdfunding bill through in the short session of the General Assembly seemed slim, the PACES Act made it over the finish line during the final week of the session. 

The PACES Act will allow North Carolina companies to raise up to $1,000,000 in any 12-month period from investors who are North Carolina residents.  Companies will be required to provide a business plan, financial information, and a description of risks.  The limit will be increased to $2,000,000 if the company provides audited or "reviewed" financial statements to investors. 

Companies will be permitted to publicly advertise the offering through a website, marketing materials or a third-party portal, after filing a notice and disclosures with the N.C. Secretary of State and paying a very small fee. 

Non-accredited investors are limited to investing a maximum of $5,000 in any one company's offering (during a 12-month time period).  Accredited investors may invest as much as they wish.  (Accredited investors are essentially those who have $1,000,000 in assets, excluding equity in their primary residences, or $200,000 in annual individual income. Congress and the SEC think that accredited investors are less vulnerable to fraud.)  Companies that raise money via crowdfunding will still have to disclose the business model, financial targets, offering terms and projected returns to investors.  Funds will be held by an escrow agent until the offering is complete. 

North Carolina's crowdfunding statute is an alternative to federal crowdfunding.  The federal JOBS Act (Jumpstart Our Business Startups Act), enacted on April 5, 2012, required the SEC to write regulations to implement many of its various provisions.  It took the SEC more than three years to finalize rules to implement Title III of the JOBS Act, known as the "crowdfunding" section of the law.  (Those rules were published in October 2015.)  Largely due to frustration over the SEC's laggardly pace, some states enacted crowdfunding laws to permit limited offerings to investors within those states.  After the SEC's crowdfunding rules became effective, some speculated that state crowdfunding rules would no longer be needed.  North Carolina's PACES Act, however, continued to advance through the legislative process, and will become law in a matter of days.  (Credit goes to Mark Easley, Benji Jones, John Skvarla, and others for pushing it through.)

Companies have multiple options for raising investment dollars from "the crowd," and those options should be carefully considered in order to maximize the benefits and minimize the effects of the various restrictions.  Often, federal crowdfunding or Rule 506(c) offerings will be advantageous, but state crowdfunding may also have its place.  A knowledgeable securities lawyer can help you make the right decision.

For more information, see my overview of crowdfunding options here, as well as my law partner Jim Verdonik's blog, Entrepreneur Intersection, and his comprehensive book on the subject, Crowdfunding: Opportunities and Challenges.

This blog post is written by North Carolina securities lawyer Matt Cordell and is for general educational purposes only; it does not constitute legal advice. Consult a knowledgeable, licensed attorney before relying upon the information in this blog post. 

 Matt Cordell is a Raleigh, North Carolina lawyer with expertise in crowdfunding, capital raising, mergers and acquisitions, startups, corporate matters, banking law and privacy law. Matt has consistently been rated one of the best lawyers in North Carolina.

July 3, 2016

North Carolina Adopts A More Efficient Assumed Business Name (or "D.B.A.") Process

NC General Assembly - Matt Cordell is a top lawyer in North CarolinaThis past week, the North Carolina General Assembly adopted a bill to streamline the process for filing assumed business names (more commonly known as "D.B.A.s"). 

Under current law, any organization that does business using a name other than the registered legal name of the entity as shown on the Secretary of State's website is required by law to register the name under which it operates (the assumed business name) by filing a Certificate of Assumed Name in each county in which it does business.   
Name Tag - Matt Cordell is the best value lawyer in RTP North Carolina
In today's world, this is an inefficient system.  It requires duplicative registrations.   Not all counties provide access to records via the internet.  Often it is unclear in which county an assumed business name might be filed, requiring multiple searches. 

For example, let's say you are trying to learn some basic information about a company, or to serve a company with a formal communication.  The company calls itself "ABC Widgets" and is active throughout North Carolina.  You will first check the Secretary of State's database of domestic and foreign companies authorized to business in North Carolina.  If ABC Widgets does not appear, it is for one of two reasons: (i) the company is organized in another state and has simply failed to register in North Carolina before doing business here, or (ii) it may be that "ABC Widgets" is merely an assumed business name of an entity.  If "ABC Widgets" is an assumed business name of the entity, you will need to know the entity's legal name in order to look up the information you need.  You will check the records of the Register of Deeds of the county within North Carolina where you believe ABC Widgets to be doing business.  However, ABC Widgets may not have registered an assumed name in that county, instead registering in one of North Carolina's other 99 counties.  You may have to check the records of several counties in order to find a registration of an assumed name, after which you will again check the Secretary of State's database for the information you need.  Clearly, the system could be improved. 

The new legislation, known as the "Assumed Business Name Act," will create a central registry of all assumed business names to be administered by the Corporations Division of the Office of the Secretary of State.  The bill has an effective date of July 1, 2017, if the Secretary of State’s office receives sufficient funding to implement the new system. Funding is apparently addressed in the recently adopted state budget. 

The bill also improves the existing language of the assumed business name statute, getting rid of some awkward language regarding "ownership" of an assumed name.

You can read the full text of the legislation here.

Matt Cordell is a business lawyer in Raleigh, North Carolina, with offices in Wilmington, New Bern, Greenville, and Asheville.