Archive for the ‘Law’ Category

Immigration Classifications and Visa Categories . . . and the H1-B Visa

Wednesday, June 11th, 2008

Those of us who’ve worked in the tech industry in Massachusetts constantly hear about H-1B visas. Right now, as during the Internet buildup in the late 1990s, we can’t get enough software engineers, so we hire qualified foreign nationals if we can, often via H1-B visas. An H1-B is a type of nonimmigrant visa that allows for temporary residence in the U.S. to work.

In fact, an H1-B is one of numerous immigration classifications and visa categories for nonimmigrants, beginning with A-1 (Ambassador; public minister; career, diplomatic or consular officer, and members of immediate family) and ending with V-3 and TPS (Temporary Protected Status). H1-Bs are used for hiring foreign nationals who will be employed in a specialty occupation or as fashion models of distinguished merit and ability. Specialty occupation means one has at least a bachelor’s degree in an area of specialized knowledge, such as law, mathematics, theology or the arts, among others. The number of H1-B visas is subject to an annual cap established by Congress.

More details on H1-Bs and how to apply are available at the U.S. Citizenship and Immigration Services (UCIS) website. Tara L. Vance at Holland & Knight has written an article, Hiring Foreign Nationals Without the Benefit of H1-B Visas, that discusses them in further detail, along with B-1, C, D, E and L-1 visas.

By the way, UCIS has a considerable number of forms available on its website, including Form I-9, which lists the documents that establish identity and employment eligibility to work in the U.S. Technical tip for HR departments: Keep your Form I-9s in a separate folder, so only they-and not the other employment documents-are accessible during a search to determine employment eligibility.

The Emergence of China and India

Thursday, June 5th, 2008

We try hard to determine the future, but it is difficult to predict because so many variables exist. Who could imagine in 1908 the scientific advances of the 20th century, the two world wars, the rise and fall of communism, and the emergence of a wealthy western economic system after a dark depression in the 1930s?

That said, from the perspective of 2008, it appears that this will be the century of the human genome and the re-emergence of China and India (“Chindia”) as economic giants (In 1500, they accounted for about 49% of the world’s gross domestic product.). They will soon account for 40% of the world’s population and have been exhibiting rapid economic growth this century.

Global capital has and will continue to pour into Chindia. E-Solutions Integrator, the company I joined the day after it was incorporated in 1999, went public (as Cambridge Technology Enterprises) on the National and Bombay Exchanges in India. We originally outsourced software development in India and later had development and support offices there.

Political and social systems have yet to catch up. For example, in China, attorney/client privilege is not recognized except regarding trade secrets. In India, under the Evidence Act of 1972, privileged communications are protected, but in-house counsel are not considered to be attorneys, so as a general rule, communications between lawyers working for a company and officers, directors and employees are not subject to protection.

The China Law Blog focuses on law for those doing business in China. It includes a list of the authors’ favorite China-oriented law blogs, such as IP Dragon, which discusses intellectual property law in China, and the China Business Law Blog.

South Korea will prosper greatly from Chinese economic development. The Korean Law Blog provides updates on Korean law, and the Korean IP Law Blog more narrowly focuses on intellectual property issues.

Indian Corporate Law reviews business law topics that impact India. Law and Other Things is a blog about Indian law, its courts and Constitution.

Federal Acquisition Regulations and then some …

Saturday, May 24th, 2008

Rules that govern purchases made by the federal government’s executive agencies are known as Federal Acquisition Regulations (FARs). They’re available in the Code of Federal Regulations at 48 C.F.R. § 1 and at the FAR Home at Acquisition Central, the government’s website for the federal acquisition community and the government’s business partners. Acquisition Central also has the FARs available in a variety of downloadable formats, along with proposed rules, compliance guides, references and other pertinent information.

48 C.F.R chapters 2-99 contain the supplemental acquisition regulations of specific federal agencies. Acquisition Central has hyperlinks to each agency and its procurement regulation websites. These include the DFARs, the supplementary acquisition regulations of the Department of Defense (Military branches also have their own supplementary acquisition regulations.). The National Archives and Records Administration publishes most current titles of the C.F.R. online.

Ken Larson, a SCORE (Service Corps of Retired Executives) Volunteer Counselor, has a blog dedicated to small business federal government contracting. Deborah Kluge has a detailed website on doing business with the federal government and a blog on writing proposals for government grants and contracts.

Drawing That Explains Copyright Law

Saturday, May 17th, 2008

A picture is worth a thousand words to Erik Heels, an engineer and patent/trademark attorney. Erik’s made a nice Venn diagram and then some showing copyright rights, fair use and unregulated uses. It’s here.

More details about copyright and registering a work can be found at the U.S. Copyright Office, where copyright records may also be searched.  Copyright law and policy, including current U.S. copyright law, regulations and current legislation also are available.  Finally, here’s a brief overview on international copyright law, highlighting key treaties and key differences between U.S. and international copyright law.

New Massachusetts Independent Contractor Advisory

Saturday, May 10th, 2008

Massachusetts employs a stricter standard than under federal law regarding whether an individual is an employee or an independent contractor. The Commonwealth first established its Independent Contractor law in 1990. Since then, it has been amended a number of times and, in 2004, significantly broadened.

Massachusetts uses a test in which three separate elements must exist in order for someone to be classified other than as an employee. On May 1, 2008, the Massachusetts Attorney General’s Fair Labor Division issued an advisory superseding the prior advisories on this topic and clarifying on how the three-part test is applied.

In contrast, the Internal Revenue Service used to use a 20-factor test that later was simplified into an 11 point test organized into three primary groups: behavioral control, financial control and the type of relationship of the parties. IRS Publication 15-A discusses these characterizations in detail, and this text provides an overview and information on related topics.

Software as a Service (SaaS)

Monday, April 28th, 2008

There’s a strong movement towards Software as a Service (SaaS) now as being more cost-efficient than traditional software licensing. In SaaS, the software provider develops, hosts and operates a web application over the Internet (A third-party provider may host and operate the application.). Customers use, but do not own, the application. It is a subscription model that may generate recurring revenues for the provider.

Here are some resources to learn more about software licensing and SaaS:

* Jim Geisman is a software pricing expert with MarketShare, Inc. He’s written Guide to Software Licensing Models, which reviews more than 30 types of models.

* The Software & Information Industry Association has produced a new whitepaper, Channels For the New SaaS Industry, which discusses differences between traditional IT channels and SaaS channels.

* Eric Esperne of James River Consulting wrote an article for Mass High Tech that discusses the pros and cons of SaaS compared with traditional licensing, Is SaaS Really Better Than Software Licensing? He offers a more detailed white paper, Is SaaS Really Better For Business Than Software Licensing?

* An article from McKinsey, Delivering Software as a Service, includes a discussion of the economics and total cost of ownership of SaaS.

Massachusetts Mandates Mandatory Treble Damages for State Wage Violations

Tuesday, April 15th, 2008

The Commonwealth of Massachusetts just became the only state in the nation to set a strict liability standard for state wage and hour violations.  The new law makes awards of treble damages for all violations, with no exception or defense, even if they were inadvertent.

The law, which takes effect on July 13, 2008, increases the cost of doing business in Massachusetts.  Watch for an increase in employment-related litigation.  More information is available here and here.

Listing Requirements of U.S. Exchanges

Tuesday, April 8th, 2008

The major exchanges for securities in the U.S. have specific requirements for company that wish to publicly list their shares. These requirements vary depending on the type of security. They include minimum share prices for an initial listing and continued traded as well as an aggregate minimum market value. They also differ depending on whether the company is U.S.-based or is a foreign issuer. The listing requirements for the three major exchanges are as follows:

* New York Stock Exchange

* NASDAQ Exchange

* American Stock Exchange

Securities Offerings on the Internet

Wednesday, March 19th, 2008

In the 1990s, my colleague, Lou Turilli,* and I wrote an article for The National Law Journal about how the Internet might shape securities offerings. I followed that up with an article for Wall Street Lawyer, Securities Offerings Online By Small, Nonpublic Businesses. It specifically focused on whether small companies could viably offer and sell securities on their own via the Internet. I concluded that, “Clearly, selling securities online is a viable concept. Yet until fundamental issues such as the problem of gaining visibility, the lack of secondary markets, the arbitrary pricing and the disinterest of established investment bankers each are addressed, the opportunity for small businesses to raise capital in cyberspace will hold great promise as an idea, but be of limited practicality in the real world.”

I don’t think that my conclusion has changed. Distribution and pricing remain key obstacles for companies that want to promote their own online offerings. Marketing the securities is still a serious issue, and there are credibility concerns for the companies as well. Thus, serious companies will continue to pursue the traditional route.

* Lou and I practiced law together at Day, Berry & Howard. She recently was Vice President and General Counsel of Ryerson.

Federal Securities Laws and SEC Filings and Forms

Friday, February 22nd, 2008

Domestic U.S. and foreign companies that list their securities on U.S. securities exchanges must file registration statements, periodic reports, and other forms with the U.S. Securities and Exchange Commission. They must be filed electronically via the SEC’s EDGAR database.

Here’s a link to the major Federal Acts that govern the securities industry: Federal Securities Laws. This is a good overview of each law and what it covers.

Three of the major Federal Acts are:

*The Securities Act of 1933 (the “33 Act”) regulates the offer and sale of securities (unless an exemption exists). The purposes of the 33 Act are two-fold: to provide disclosure to investors for the offer and sale of securities being sold to the public, and to prevent misrepresentation and fraud in connection therewith.

*The Securities Exchange Act of 1934 (the “34 Act”) primarily deals with the secondary trading of securities after they have been issued or sold. The 34 Act covers corporate reporting, proxy solicitation, tenders orders, insider trading, and the registration of exchanges, associations and others.

*The Investment Company Act of 1940 (the “40 Act”) “regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose owns securities are offered to the investing public.”

Here’s another excellent resource at the SEC. A list of SEC forms required under each Act and many of the rules, regulations and schedules associated with them are available at the SEC Forms List page.

Directors and Officers Liability Insurance

Wednesday, February 6th, 2008

Directors and Officers Liability Insurance, commonly referred to as “D&O insurance,” covers damages and defense costs if a company’s officers and/or directors are sued for wrongful acts that may have occurred while they were performing their corporate duties. It is payable to the corporation or the directors or officers themselves.

Wrongful acts may include errors, omissions, misstatements or misleading statements, breach of duty to the corporation or neglect. Plaintiffs may include just about anyone: shareholders, vendors, creditors, regulators, competitors, and employees.

D&O insurance used to only be available to larger, established corporations. In recent years, however, even small, private companies have been able to purchase D&O insurance. CarpenterMoore, a Nasdaq company, provides D&O liability insurance among its products.

Voting Trust Agreements and Effecting Corporate Action

Saturday, February 2nd, 2008

If you want to cause a corporation do something on the corporate level if a particular event occurs, there are a variety of avenues you can pursue. Here are some options:

* Put a provision in the corporation’s charter (AKA Article of Organization or Articles of Incorporation). However, this is inflexible and costs money. If you want to change the provision, it’s a hassle. Plus, it’s a public document, so all the world knows what you’re doing.

* Create a Shareholders’ Agreement. The agreement among shareholders would recite all the reasons for the behavior, but there’s no guarantee that the behavior will occur, so it’s much riskier. A shareholder agreement gives the right to demand action, but can’t force the action. Only a lawsuit can do that.

* Change the corporation’s Bylaws to require the change. This doesn’t cost anything and it’s not public. That said, it ties the hands of the directors. If the event is conditional, then you also would have a side agreement among the shareholders to require the event to occur if the condition occurred. However, there’s an argument that this restricts the directors’ ability to manage the corporation unless all the directors are parties to the side agreement.

* Create a Voting Trust Agreement. A voting trust transfers the legal title to the stock and its voting rights to a trustee for a certain period of time. It affects only those shareholders who are party to the agreement. It provides flexibility and privacy and is fairly inexpensive.

Like any legal document, a voting trust agreement is a creature of the particular jurisdiction to which it is subject. The voting trust must be acknowledged by the corporation and its shareholders. Further, it’s a good idea for the trustee and alternate trustee to acknowledge it also.

A Conditional Voting Trust Agreement is a voting trust agreement that has no affect unless a particular event occurs. In that case, the trustee will step in with control of all shares to guarantee the results. Essentially, the trustee is an enforcer. It’s a good idea to avoid requiring the trustee to have physical possession of the shares in any voting trust agreement, as that could delay the trustee’s actions.

Working in a Regulated Industry – Dos and Don’ts

Monday, January 7th, 2008

The average company in the mortgage brokerage world is just a mom and pop business with a few people. Regulation is one reason that the industry is highly fragmented. Residential mortgage lending and brokerage is highly regulated in the United States by the federal government and by each state agency. As the President of a mortgage brokerage, one of the primary obstacles to our growth is complying with ever-changing regulations.

So how do you keep up with regulations and make sure you stay in compliance? First, join the relevant trade organizations, so you can keep up with changes. For example, in Massachusetts, I’m a member of both the National Association of Mortgage Brokers (NAMB) and the Massachusetts Mortgage Association (MMA). They keep me in the loop of both proposed changes and those that actually occur.

Second, make sure your required forms and disclosures are up-to-date and accurate. Again, belonging to national and state trade organizations helps on this count.

Third, invest in your employees. Make sure they are educated on both the relevant law and regulation and also on when and how to complete required forms and disclosures. Having educated employees also makes them better at their jobs, and customers are better served. Your company will do better because many competitors don’t bother to invest in their employees.

Fourth, audit employees’ work both during and after a transaction occurs. For example, during a mortgage transaction, when a mortgage consultant (salesperson) transmits a file to the processing center, the processor makes sure that the forms and disclosures are completed correctly. If a disclosure needs updating during the transaction as a result of a change in program or rate, then the consultant or processor, depending on the type of disclosure, is required to make it. When a transaction is completed, senior managers review files to make sure they comply with the law. If there is an document that should be completed differently, then it is reviewed with the employee. In other words, there is constant training as a result of this audit.

Fifth, make sure all of your files are in order. In our case, this not only means completed or withdrawn mortgage transaction files, but all other files we are required to keep by law. These include financial books and records and advertising (In Massachusetts, for example, one must keep all mortgage advertsing, even intangible items like radio scripts, for three years.).

What’s the result of doing all of the above? Regulators may schedule reviews or pop in unannounced. It shouldn’t matter. If your files and records are in order and completed properly, you’ll come across as a professional. The regulators will realize they’re dealing with pros, an above-average company in the industry. They may spend less time during the review and you’ll come out shining. I know, because we’ve received the highest rating during all of our compliance reviews to date.

I’ve discussed the dos of working in a regulated industry. What are the dont’s? They’re exactly the opposite of the above. Ignore the basics and you’ll end up with heavy fines, bad publicity and perhaps, even being shut down.