Join Wendel Rosen in Making a Difference

Apr 27, 2021

Wendel Rosen is again participating in the Food from the Bar Food Drive in support of the heroic work of the Alameda County Community Food Bank (ACCFB).  The need has never been greater, and ACCFB needs our help.

  • ACCFB estimates the need for food assistance has doubled since the start of the pandemic.
  • ACCFB is distributing more than 1 million pounds of food per week. That’s enough food for 60,000 people daily.
  • Every $1 donated helps provide two healthy meals.

The Food from the Bar drive officially starts May 1 and goes through May 31, but you can donate online now by using this link: ACCFB Virtual Food Drive (  Please be sure to click “Shop/Donate” for the Wendel Rosen LLP team to make your donation.   Donations of any amount truly help.  Together we can make a real difference in our community.

And, pass it on!  Please feel free to share the Food Drive donation link with friends and family members who may be interested.


Restaurant Revitalization Fund – Applications Released

Apr 26, 2021

Written by Anna Nagornaia – Associate, Wendel Rosen’s Business Practice Group

On April 17, 2021, the Small Business Association (SBA) released a comprehensive Restaurant Revitalization Fund (RRF) Program Guide outlining eligibility and the application process. Restaurants and other foodservice entities can now start preparing their RRF Grant Applications (SBA Form 3172).[1] The SBA has explicitly stated not to submit RRF forms at this time.

How to Apply?

Restaurants and other foodservice entities can apply through SBA-recognized Point of Sale Restaurant Partners or directly with the SBA in a forthcoming online application portal.

Please see my previous article about required documentation.

In addition to the core documentation required for all applicants, brewpubs, tasting rooms, taprooms, breweries, wineries, distilleries, and bakeries must provide documents evidencing that onsite sales to the public comprise at least 33.00% of gross receipts for 2019, which may include Tax and Trade Bureau (TTB) Forms filed, state or local government forms filed, or internally created reports from inventory management, sales reporting, or accounting software.

Inns that are applying for the RRF grant must provide documents evidencing that onsite sales of food and beverage to the public comprise at least 33.00% of gross receipts for 2019.

Foodservice entities, other than restaurants, that opened in 2020, must provide documentation evidencing that the original business plan contemplated at least 33.00% of gross receipts in onsite sales to the public.

How Much Can You Get?

The SBA may provide funding up to $5 million per location, not to exceed $10 million total for the applicant and any affiliated businesses.[2] The minimum award is $1,000. So, if your business requires less than $1,000, you are not eligible for the RRF grant.

How Much Time Do You Have To Use the Money?

You must use your entire RRF grant by March 11, 2023 on eligible expenses incurred beginning on February 15, 2020 and ending on March 11, 2023. If your business permanently closes before March 11, 2023, the covered period will end when the business permanently closes.

Awardees that are unable to use all of the funds on eligible expenses by the end of the covered period must return any unused funds.

What are Eligible Expenses?

You may use the RRF grant for the following expenses during the covered period:

  1. Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums;
  2. Payments on any business mortgage obligation (both principal and interest; but not prepayment of principal on a mortgage obligation);
  3. Business rent payments, including rent under a lease agreement (this does not include prepayment of rent);
  4. Business debt service (both principal and interest; this does not include prepayment of principal or interest);
  5. Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
  6. Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment;
  7. Construction of outdoor seating;
  8. Business supplies, including protective equipment and cleaning materials;
  9. Business food and beverage expenses, including raw materials for beer, wine, or spirits;
  10. Covered supplier costs made by the business to a supplier for goods that:
    • Are essential to the operations of the business at the time at which the expenditure is made; and
    • Is made pursuant to a contract, order, or purchase order in effect at any time before you received the RRF; or
    • With respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period;

11. Business operating expenses (expenses incurred through normal business operations that are necessary and mandatory for the business such as rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, and fees. Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.

The SBA has stated that past-due expenses are eligible if they were incurred beginning on February 15, 2020 and ending on March 11, 2023.

Good Faith Certification

You must make a good faith certification on the RRF application that:

  1. Current economic uncertainty makes this funding request necessary to support the ongoing or anticipated operations of your business; and
  2. You do not have a pending application for and have not received a Shuttered Venue Operator grant from SBA.

There is no further explanation of what constitutes necessity. This good faith certification requirement is similar to the PPP’s loan necessity certification.[3] Presumably, showing a reduction in revenue would indicate financial hardship. However, if your sales picked up at the time of application and the business is otherwise financially stable, we advise a further review of the necessity requirements to avoid complications down the road.


If you received a Paycheck Protection Program (PPP) Loan, an Economic Injury Disaster Loan (EIDL), or any state and local small business grants (via CARES Act or otherwise), you can still apply for an RRF grant. Note that the amount you received through PPP, EIDL, or other grants must be subtracted from your gross receipts. If you have a pending application for a PPP loan when applying for Restaurant Revitalization funding, the SBA has made it clear that any pending PPP applications should be withdrawn.

For assistance preparing your application, you can contact the SBA call center support at 1-844-279-8898 or your local SBA District Office . If you still have questions or require additional clarifications, please contact the attorneys in Wendel Rosen’s Food & Beverage Practice Group.

[1] Click here to review an application sample provided by the SBA.

[2] An Affiliated Business or affiliate is a business in which an eligible entity has an equity interest or right to profit distributions of not less than 50%, or in which an eligible entity has the contractual authority to control the direction of the business, provided that such affiliation shall be determined as of any arrangements or agreements in existence as of March 13, 2020.

[3] See SBA FAQ #31.


Update: Restaurant Revitalization Fund Grants

Apr 26, 2021
Written by Anna Nagornaia – Associate, Wendel Rosen’s Business Practice Group The Restaurant Revitalization Fund (RRF) was created to provide direct relief to restaurants and other foodservice venues affected by the COVID-19 pandemic.[1] As the Small Business Association (SBA) has yet to release the RRF applications, we encourage restaurant owners to continue monitoring the SBA website for news and updates on the RRF grants and the application process. In the meantime, the National Restaurant Association (Association) has issued updated FAQs on the RRF Grant Program. The Association provides the latest information about how the RRF grant process might work, as well as new developments on eligibility.  The FAQs can help you prepare for the RRF Application process, and we encourage all restaurant owners to review them. New Covered Period? The RRF covered period might be extended by an additional 14 months, which would mean applicants that received an RRF grant could be given until March 2023 to spend the money. Eligibility? According to the Association, restaurants and other foodservice entities that have permanently closed or those that are operating under bankruptcy protection (without an approved plan of reorganization) will not be eligible for the RRF grant. We know that bakeries, breweries, brewpubs, distilleries, taprooms, wineries and inns may apply for a RRF grant. In order to be eligible for the grant, those foodservice entities will have to show that at least a third of their revenues come from the sale of food and beverages consumed onsite. Required Documents? Restaurants and other foodservice entities that are entitled to RRF grants should prepare the following documents:
  • An application form and the IRS Form 4506-T, as well as gross receipts documentation.
    • Applicants in operation before January 1, 2019 must supply gross receipts for 2019 and 2020
    • Applicants in operation through part of 2019 must supply gross receipts for 2019 and 2020
    • Applicants that began operations on or between January 1, 2020 and March 10, 2021 and applicants that have not yet opened as of March 11, 2021, but have incurred eligible expenses, must supply documentation of gross receipts and eligible expenses for the length of time in operation.
The documents to show gross receipts and eligible expenses, include:
  • Business tax returns (IRS Form 1120 or IRS 1120-S)
    • IRS Forms 1040 Schedule C; IRS Forms 1040 Schedule F
    • For a partnership: partnership’s IRS Form 1065 (including K-1s)
    • Bank statements
    • Financial statements such as Income Statements or Profit and Loss Statements
    • Point of sale report(s), including IRS Form 1099-K
The Application Process? On March 30, 2021 the SBA clarified that, in order to streamline and simplify the application process, the RRF applicants will not be required to apply for a SAM (System for Award Management) number. The SBA stated that it plans to award RRF grants in the order in which applications are received. We will continue to monitor and provide updates on the RRF Grant Program. Should you have questions about the RRF applications, do not hesitate to contact the attorneys in Wendel Rosen’s Food & Beverage Practice Group.
[1] You can find our first article on the RRF here.

Restaurant Revitalization Fund – COVID Relief For the Ready!

Mar 26, 2021

Written by Anna Nagornaia – Associate, Wendel Rosen’s Business Practice Group

Help is on the way for restaurant owners who were hit hard by the COVID-19 pandemic. On March 11, 2021, President Joe Biden signed the American Rescue Plan Act of 2021  (the “Act’), a $1.9 trillion bill aimed at boosting the American economy during the COVID-19 pandemic. The Act created a $28.6 billion Restaurant Revitalization Fund (RRF). Unlike the Paycheck Protection Program (PPP) loans, the RRF will be administer directly by the Small Business Administration (SBA).

What is the RRF grant?

An eligible restaurant business may receive a tax-free federal grant equal to the amount of its COVID 19 pandemic-related revenue loss. Unlike the PPP, the RRF is a grant, which means you do not need to pay it back.

Who is Eligible for the RRF?

Eligible entities include: restaurants, food stands, food trucks, food carts, caterers, saloons, inns, taverns, bars, lounges, brewpubs, tasting rooms, taprooms, licensed facilities or premises of beverage alcohol producers where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drinks.

If you own more than twenty restaurants, your business is not eligible for the RRF. Publicly traded companies are also not eligible for the RRF. However, if you own a franchise of a publicly traded company, your business is eligible.

For an initial period (one to two weeks), the SBA will prioritize awarding grants for small businesses owned and controlled by women, veterans, or socially and economically disadvantaged small business concerns.

How much money is available?

In total, $23.6 billion will be available for restaurant businesses of different sizes based on annual gross receipts. Specifically, $5 billion will be available to businesses with gross receipts of $500,000 or less during 2019.

How much can you get?

Generally, the total RRF grant amount for an eligible business and any affiliated businesses is capped at $10 million and is limited to $5 million per physical location of the business.  Specifically, the RRF grant is based on your pandemic-related revenue loss.

To calculate your revenue loss, subtract your 2020 gross receipts from the 2019 gross receipts. If your business was not in operation for the entirety of 2019, the total revenue loss is the difference between 12 times the average monthly gross receipts for 2019 and the average monthly gross receipts in 2020 (or a formula from SBA). If your business was not in operation until 2020, you can still receive a grant equal to the amount of “eligible expenses” subtracted by your gross receipts received (or a formula from SBA). If your business was not yet in operation as of the application date, but it has made “eligible expenses,” the grant would be made equal to those expenses (or a formula from SBA).

Note that your pandemic-related revenue losses are reduced by any amounts received from the PPP First Draw and Second Draw loans in 2020 and/or 2021. However, any funding received from the Economic Injury Disaster Loans (EIDL) or Employee Retention Tax Credit (ERTC) will not count towards your 2020 revenues. Even so, you must make sure that the EIDL and/or ERTC funds are not used to cover the same expenses as the RRF grant.

What are Eligible Expenses?

The RRF is to help restaurant owners maintain operations.  “Eligible Expenses” under the RRF  include payroll, principal or interest on mortgage obligations, rent, utilities, maintenance including construction to accommodate outdoor seating, supplies such as protective equipment and cleaning materials, normal food and beverage inventory, certain covered supplier costs, operational expenses, paid sick leave, and any other expenses that the SBA determines to be essential to maintaining operations.[1]  (Note: you cannot use these funds to embark on re-designing the interior of your restaurant or to expand indoor seating.)

Eligible expenses are those incurred from February 15, 2020 to December 31, 2021 (the “Covered Period”), or a date determined by the SBA. If your business did not spend all of its RRF funds, or your business permanently closes before the end of the Covered Period, you must return unused funds to the Treasury.

When will the RRF grants be available?

We do not have a concrete date as to when the SBA will start taking RRF applications. According to Rep. Earl Blumenauer (D- Or.), the SBA will likely open up the RRF grant applications “within weeks, not months.”

The SBA’s current relief efforts can be found at, additional details about RRF grants will also be posted on the website.

What can you do to prepare?

We know demand will be extremely high for the RFF grants (remember the chaos around the first round of PPP loans). Therefore, we recommend you do everything to be as prepared as possible. While you wait for the RRF applications to open, you should (1) get your DUNS number here, and (2) get your SAM number here. You will need these numbers to register with the SBA in order to apply for the RRF grant. Also, you should begin compiling your receipts and financial statements to show your 2019 and 2020 revenues.

Should you apply for RRF and PPP?

Yes. Remember, there is no guarantee that everyone who is eligible for an RRF grant will actually receive it. Also, it is likely that RRF funds will run out very quickly.

If you are eligible for a PPP loan, the U.S. Chamber of Commerce suggests that you apply for it as soon as possible.[2] Even though your RRF revenue losses are reduced by the amount of your PPP loan, if you are using the PPP funds correctly, your PPP loan will be forgiven, and the PPP program continues to be a viable lifeline for many businesses.

Should you have questions about your PPP or RRF applications, do not hesitate to contact the attorneys in Wendel Rosen’s Food & Beverage Practice Group.  Our restaurant and café clients range from single location businesses to nationwide chains, and they routinely turn to us for guidance based upon our years of industry experience.

[1]Covered supplier costs are expenditures for the supply of goods that (a) are essential to the operations of your business at the time at which the expenditure is made and (b) are made pursuant to a contract, order or purchase order (i) in effect at any time before the covered period with respect to the applicable covered loan or (ii) with respect to perishable goods, in effect before or at any time during the covered period.

Covered operations expenditures are any payments for any business software or cloud computing service that facilitates business operations; product or service delivery; the processing of payments or tracking of payroll expenses, human resources, sales and billing functions; or accounting or tracking of supplies, inventory, records and expenses.

[2] The deadline to apply for a PPP loan is March 31, 2021, and unless Congress extends the PPP, access to those funds will cease this month. For more information on PPP loans, please see


Sargento Cheese Faces Litigation for Its ‘No Antibiotic’ Claim – Bill Acevedo Provides Legal Insight on the Lawsuit

Jan 28, 2021

In an article by Food Navigator USA, Partner Bill Acevedo comments on the recent legal challenges leveled against Sargento Foods and the “no antibiotic” claim used on many of its’ product packaging. The December 2020 and January 2021 lawsuits state that the phrasing on Sargento Foods’ packaging is false and misleading, pointing to independent lab tests that show Sargento cheese products contain detectable levels of antibiotics.

Food Navigator looked to Bill for guidance on what this food litigation portends, as labeling claims continue to be challenged in court and remain a potential liability risk for food manufacturers. Bill offered his thoughts on the challenges facing the food manufacturer as well as recent labeling guidance relevant to the dairy industry. Click on the link to read these insights.

To read the full article, visit Food Navigator USA.


Returning to the Workplace: COVID-19 and New Laws for 2021

Jan 21, 2021

Join Tammy Brown and David Goldman for a discussion of the challenges of managing employees in the age of COVID-19. The presentation will include a review of the laws and regulations that pertain to COVID-19, working remotely, handling employees returning to the workplace, sick leave and employee vaccinations. In addition, the most relevant new employment laws enacted and affecting employers will be reviewed, many of which require changes in existing policies and procedures, and updating employee handbooks. If you are doing business in California and have employees or independent contractors working for you, you will want to attend and become familiar with your new obligations to employees.

The topics to be discussed include:

  • COVID in (and out) of the workplace – prevention plans, outbreak orders, and sick leave
  • Expansion of the California Family Rights Act and employee leaves of absence
  • When is a worker your employee or an independent contractor—changes in the law—again
  • New employer pitfalls when employees file claims with the Labor Commissioner
  • New legal exposure when you buy a business that lost an employee wage claim

DATE January 21, 2021

TIME 1:00 PM – 2:00 PM PST

REGISTER Click here to register.

COST This is a complimentary webinar.


Partner Bill Acevedo Highlights Potential Hurdles for the Food and Beverage Industry in 2021

Dec 23, 2020

Food Navigator-USA published an article on December 21, 2020 about the outlook of the food and beverage industry in 2021. They sought information from food and beverage attorneys, including Wendel Rosen Partner Bill Acevedo. In the article, Bill lists the issues the industry may continue to face as the impacts of COVID-19 transfer to the new year. Bill and his industry peers share insights that every food and beverage company should consider as they plan for 2021.  Read the article here.


New Law – Risks, Opportunities and Major Changes to the Paycheck Protection Program

Jun 09, 2020

Written by Anna Nagornaia, Associate, Wendel Rosen LLP’s Business Practice Group

Regardless of what industry you are in, if you applied for a loan under the Paycheck Protection Program (PPP), there are major developments that you need to know.  On June 3, 2020, the Senate passed H.R. 7010 entitled the Paycheck Protection Program Flexibility Act of 2020 (the “PPPFA”). On June 5, 2020, President Trump signed the PPPFA into law. The PPPFA significantly changes a number of provisions in the Paycheck Protection Program (PPP) loan program enacted as part of the CARES Act.

Summary of the PPP[1]

The PPP authorizes up to $659 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. The program is overseen by the Small Business Administration (“SBA”), but banks are the ones who handle the application process. As of now, there are approximately $140 billion still left unallocated for small businesses.

The amount of the PPP Loan is based on not more than 2.5 times the average total monthly payroll costs incurred in the one-year period before the loan is made. That amount is subject to a $10 million cap. The CARES Act provides for a different applicable time period to calculate the maximum amount for seasonal and new businesses. Payroll costs will be capped at $100,000 annualized for each employee.

In general, the PPP is aimed at businesses with 500 or fewer employees. Because the pandemic is inflicting tremendous economic damage on the hospitality industry, the CARES Act permits businesses in the lodging and restaurant industries with operations at more than one physical location to participate in the PPP as long as they have 500 or fewer employees at each location.

Loan Maturity Changes

Even though the CARES Act provided for a maximum loan maturity of 10 years, the SBA decided that PPP loans would have a 2-year maturity. The PPPFA extends the minimum maturity of PPP loans to 5 years. The new loan maturity period applies to any PPP loan made on or after the enactment of the PPPFA. Although lenders and borrowers are not required to modify PPP loans to provide for a longer payment period, they may mutually agree to modify the maturity terms of prior-disbursed PPP loans. In order for borrowers with an existing PPP loan to take advantage of the new law, their lenders have to agree to the 5-year maturity period. It seems unlikely that lenders will be thrilled to extend maturity of these low-interest loans.

Forgiveness Changes

Covered Period

Under the new law, the covered period for PPP loan forgiveness will extend from 8 weeks from the date of origination to the earlier of 24 weeks from the origination date or December 31, 2020. If you received a PPP loan before the enactment of the PPPFA, you may choose to continue using the 8-week covered period set forth in the CARES Act. The new law provides more time for borrowers to spend PPP funds, which means borrowers have more time to spend the loan on allowed payroll and non-payroll expenses.[2]

The new covered period also increases the amount of time a borrower has to hire or re-hire employees in order to avoid a reduction in loan forgiveness. By hiring employees back before the end of 2020, borrowers will be able to increase their loan forgiveness amount.

The PPPFA also makes it easier for borrowers to maintain their wages/salaries levels, and presumably avoid reduction in loan forgiveness. The PPP loan amount was calculated by multiplying one month of 2019 payroll by 2.5, which equaled approximately 10 weeks of payroll. With the increased covered period, borrowers now have the flexibility to spend 10 weeks of payroll until the end of 2020.[3] This will make receiving complete loan forgiveness more likely.

Reduction in FTEs

The PPPFA adds a new exemption regarding hiring or re-hiring full-time equivalent (FTE) employees to qualify for full loan forgiveness. The current PPP loan forgiveness rules contain a provision which reduces loan forgiveness in proportion to the reduction of a borrower’s employees during the 8-week period, provided that the borrower fails to hire or rehire the same number of employees by June 30th.

The PPPFA states that the amount of loan forgiveness will not be reduced due to a reduction in the number of FTE employees if a borrower, in good faith, documents (i) the inability to rehire individuals who were employees on February 15, 2020; and (ii) the inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

Moreover, the amount of loan forgiveness will not be reduced due to a reduction in the number of FTE employees if a borrower, in good faith, documents the inability to return to the same level of business activity at which the borrower operated on or before February 15, 2020, due to compliance with federal governmental requirements or guidance (DHHS, CDC or OSHA) issued between March 1, 2020, and December 31, 2020, relating to standards of sanitation, social distancing, or other worker or customer safety requirements due to COVID-19.

Requirement to Spend 75% on Payroll

Currently, in order to be eligible for full loan forgiveness, the SBA requires that a borrower spend at least 75% of the PPP funds on payroll expenses.

Under the PPPFA, borrowers must use 60% of the PPP funds for payroll expenses, and may use up to 40% for permitted mortgage, rent, utilities, and interest on secured debt to receive loan forgiveness. As currently drafted, the PPPFA requires borrowers to spend at least 60% of PPP funds to receive any loan forgiveness. This means that if at least 60% of the PPP funds are not spent on payroll, borrowers will not be eligible for loan forgiveness. This is a major change from the 75%/25% rule created by the SBA, which reduced the amount of loan forgiveness if less than 75% of the PPP funds was used to cover payroll expenses.

Payment Deferral

The PPPFA replaced the 6-month deferral of payments due under PPP loans with deferral until the date on which the amount of forgiveness determined under the CARES Act is remitted to the lender. If a borrower does not apply for forgiveness, the borrower must begin making payments 10 months after the covered period ends (the new covered period is the earlier of 24 weeks from loan origination or December 31, 2020 for all current PPP borrowers).

Payroll Tax Deferral

Lastly, the PPPFA allows all employers to take advantage of the CARES Act deferral of the 6.2% employer portion of social security payroll taxes, regardless of whether they have had a PPP loan forgiven.[4]

[1] For more information on the PPP please visit the CARES Act section.

[2] See for a definition of allowed payroll and non-payroll expenses.

[3] Section 1106(d)(3)(A) of the CARES Act states that the amount of loan forgiveness will be reduced by the amount of any reduction in total employee salary/wages during the covered period, if that reduction exceeds 25% of the total salary/wages of the employee during the most recent full quarter during which the employee was employed before the covered period. The PPPFA amends the term “covered period.” Now, it should not be a problem for most borrowers to spend at least 75% of payroll of one quarter throughout the rest of this year. This may be an unintended consequence that will be rectified down the road, but at least for now, it is the law.

[4] CARES Act Section 2302(a)(3) required borrowers who received PPP loan forgiveness to cease the deferral of payment of employer old age, survivors and disability insurance (OASDI).



COVID-19 Risk Factors Belong in Your Private Placement Memorandum

Apr 23, 2020

Co-written by Karen Balderama, Wendel Rosen LLP Business Practice Group Co-Chair and Mia Butera, Wendel Rosen LLP Business Attorney

The COVID-19 pandemic will have lasting unknown effects on businesses and has already caused delays and cancellations with respect to fundraising efforts and investment transactions planned or already in progress. Although raising capital during a pandemic seems like an impossible task, there are investors and issuers that are carefully progressing through the process of pitching, conducting due diligence, negotiating terms, and even closing rounds of financing. Issuers and investors fortunate enough to move forward on their transactions will have some additional considerations to mull over as they negotiate terms and determine an appropriate valuation for a company at a time when the global economy appears to be on the brink of collapse.

This post will discuss the need for companies thinking about fundraising in a private offering of securities to make additional disclosures to prospective investors regarding the impact of the COVID-19 pandemic.

For non-reporting companies conducting a private offering of their securities to investors, disclosures about how the COVID-19 pandemic has and will continue to impact the issuer should be made in a private placement memorandum (PPM). A PPM is the primary disclosure document provided to prospective investors in private offerings of securities to help investors make an informed decision regarding whether to invest in a particular business. Generally, a PPM will provide information about the issuer, the securities to be issued, the issuer’s business, operations, and the advantages, disadvantages, and most importantly, the risks associated with the issuer and thereby the securities the investors intend to purchase. The COVID-19 pandemic will have a material adverse effect on the global economy and on many businesses. A failure to disclose or adequately describe the investment risk it poses may be a material omission or misstatement that could allow investors to have claims for damages or even rescind their investments.

Not all issuers will be affected equally by the COVID-19 pandemic. For many businesses, the impact of the pandemic will be far reaching and substantial, but it may not be material for others. This is why the risk factors disclosed in PPMs should be specifically tailored to address the issuer’s own unique, or not so unique, set of circumstances. Issuers and investors alike will be confronted with challenges caused by disruptions in the consumer marketplace, government regulations and restrictions in response to the pandemic, and other unknown changes in federal and state law. Disclosures should be made around the significant uncertainties regarding the effect of the COVID-19 pandemic on different aspects of the issuer’s business, such as labor and employment matters, supply chains, distribution and customer demand, and the short and long-term negative impact on the issuer’s operations, financial condition and projections.

Labor and Employment

In addition to the usual risk factors around hiring employees and/or independent contractors such as workers’ compensation, wage and hour compliance, availability of highly skilled workers, immigration laws, harassment claims, and management issues, the COVID-19 pandemic will likely have a major impact on hiring, retaining, paying, and managing workers. Shelter in place orders mean that non-essential businesses are forced to operate almost entirely remotely which will prove challenging for even the most tech-savvy and remote-friendly companies. Essential businesses that still operate during the pandemic must put into place and enforce social distancing policies, and may have additional liability if an employee contracts the virus at the workplace.

Supply Chain

The COVID-19 pandemic will likely have some sort of impact on an issuer’s supply chain. This might be in the form of delays in shipments of supplies, key vendors temporarily ceasing operations, service providers unable to perform their duties in a timely fashion, or distributors and sales teams unable to sell and market the issuer’s products. This could or may already have a negative effect on the issuer’s financial condition.

Closures for Non-Essential Businesses

It will be important to determine if the issuer is deemed an “essential business” in the jurisdictions in which it operates. Whether it is or not should be disclosed. Additionally, an issuer should have a general plan for how operations will continue during and after the pandemic. For businesses that are non-essential and require on-site activities (manufacturing, in-person service providers, etc.) it may prove impossible to carry on operations as normal and there are unknown risks and restrictions for future operations.

Demand and Market Downturn

The COVID-19 pandemic will likely have an adverse effect on the global economy as a whole, resulting in an economic downturn that could impact demand for the issuer’s products or services. Likewise, issuers should let investors know if they are in a position to take advantage of closures or other impacts of the pandemic, for example businesses offering medical supplies, remote collaboration technologies, or delivery services may see an uptick in demand and revenue.

Government Response

Federal, state and local governmental authorities have passed legislation and issued rules and executive orders aimed at blunting the economic impact of lockdowns and shelter in place orders to workers and businesses alike. The costs of such measures such as mandated paid sick leave may be borne solely or partially by businesses, which may have a material adverse effect on their financial condition. Uncertainty around how long the pandemic will last and its continuing effects on the economy may result in further government actions that could adversely impact the business and financial prospects of the issuer. Issuers are advised to monitor new legislation or orders to which they may be subject and assess how such government actions may impact their business. If the issuer’s business will be or might be materially affected, appropriate disclosures to investors should be made.

An issuer may either (1) revise or update its existing risk factor disclosures in its offering materials to address how each area has been or may be affected by the COVID-19 pandemic, or (2) include a new standalone risk factor disclosure regarding the COVID-19 pandemic and its impact on the issuer’s overall business. Either way, it is important to be fully transparent about the pandemic’s effect on the business of the issuer. Because of the rapidly changing nature of the pandemic and government and societal reactions, it is important that an issuer monitor these developments and their impact on its business and update its disclosures as circumstances change.

Issuers or investors with questions regarding COVID-19 risk factor disclosures may contact any member of Wendel Rosen’s Business Practice Group.


Wendel Rosen Regretfully Changes Its Plans For Expo West

Mar 03, 2020

Wendel Rosen LLP’s Food & Beverage Practice Group attorneys have been regular attendees at Expo West from the earliest days of this beloved annual gathering of emerging and established brands, industry insiders, buyers, investors, and service providers.  The meaningful gathering of our community, the joy of reconnecting with our friends, and the fun of making new connections to celebrate in the years to come, is what makes this event truly special.  This year, though, it is the very act of gathering that also presents a risk that many in the industry have deemed too great to bear.

The Centers for Disease Control and Prevention (CDC) advises that COVID-19 is generally thought to spread mainly from person-to-person who are in close contact with one another (approximately 6 feet) or through respiratory droplets produced when an infected person coughs or sneezes.  The virus, according to the CDC spreads easily and sustainably in a community.  Not surprisingly, these factors make attending Expo West a difficult choice for our attorneys.  We are in regular contact with our clients, friends and acquaintances throughout this multi-day show, often shaking hands (or giving high-fives), enjoying product samples, and exchanging cards.  While we are not suggesting that participating in Expo West must be avoided, we are taking the position that the health of our attorneys and the community that they serve is of paramount concern.

In an open letter to the community, New Hope Network has acknowledged the challenge in hosting an event attended by tens of thousands of people from all over the world given the ongoing spread of COVID-19:  “Many of our partners due to attend Expo West have urged us to continue with the show. Many have suggested we postpone it. The polarity of responses leaves us in a difficult position, as we do not want to upset or let down anyone in our community.”

To our clients and industry contacts who have made the difficult decision not to attend Expo West this year, we share your disappointment in missing the show.  To those who have decided to attend Expo West, we wish you a healthy, happy and productive show.   We hope to catch up with all of our clients and industry contacts soon.