With business being conducted increasingly online and on a global scale, the protection of personal data is becoming increasingly more important. Although the U.S. has no comprehensive federal data privacy statute governing the collection, transfer or removal of personal data, more than a dozen states in the U.S. have passed broad data privacy laws. There has also been a global push for legislation governing the protection of personal information. One of the most comprehensive examples of such legislation is the European Union’s General Data Protection Regulation, Regulation (EU) 2016/679 (the “GDPR”), which went into effect in 2018.
As more legislation is passed, businesses need to be aware of the requirements of data protection to ensure compliance. Although there is no comprehensive federal data privacy law in the U.S., many businesses operate in jurisdictions where data privacy laws already exist. Additionally, trends among state-level laws and the GDPR may indicate the key points of a federal data privacy law, if ever adopted. Both the GDPR and the Delaware Personal Data Privacy Act (which goes into effect on January 1, 2025) (the “DPDPA”) define personal data as any information that is reasonably linkable to an identified or identifiable individual. The laws also share practical guidance around the collection and use of personal data. The GDPR mandates that personal data may only be collected for specific, explicit, and legitimate purposes and cannot be processed in a manner that is incompatible with those purposes. The DPDPA prohibits the processing of personal data in ways that are not reasonably necessary in relation to the purposes for which the data is being processed. Both laws require that the data subject consent for his or her data to be processed or stored. The entity or individual that determines the purposes and means of processing personal data (the “Controller”) must also provide a method of revoking consent that is at least as simple as the method of providing consent.
One of the most important aspects of data protection laws is the security obligations placed on the Controller, as well as the person or entity that processes the personal data (the “Processor”). The DPDPA requires the Controller to establish and maintain administrative, technical, and physical data security practices, but it is crucial that the level of security is appropriate to the volume and nature of the personal data being processed. The GDPR and DPDPA also place security guidelines on the relationship between the Controller and the Processor (although they may be the same in most cases), such as the requirement that any contract between the parties include provisions regarding confidentiality and requirements to delete or return all personal data upon request. The GDPR goes even further by requiring the Controller’s written authorization to allow the Processor to engage another Processor.
Additionally, data protection laws typically require the Controller and Processer to perform a data protection assessment for certain types of data processing. The DPDPA mandates an assessment for processing personal data for the purposes of targeted advertising, and the GDPR mandates an assessment for the large-scale collection of personal data of racial and ethnic origins or political opinions. For the DPDPA, an assessment must identify and weigh the benefits of processing the personal data against the potential risks to the consumer associated with the processing, as well as the mitigating safeguards that can be implemented by the Controller. An assessment under the GDPR must contain a systemic description of the processing operations and its purposes, an assessment of the necessity and proportionality of the processing, and an assessment of the risks to the rights and freedoms of the data subjects.
Proactive personal data protection is critical for any business that comes into contact with personal data, as non-compliance with data protection laws can result in significant legal, financial, and reputational damage. As state-level laws like the DPDPA come into effect and the GDPR influences global standards, businesses must proactively align their practices with these evolving requirements. Failure to implement proper data protection measures may not only lead to fines or penalties but will also affect a company’s ability to maintain customer trust. Additionally, many insurance providers are now requiring companies to have data protection policies in place as a prerequisite for honoring claims related to data breaches. Without such policies, businesses may find themselves without coverage in the event of a cyberattack or security breach, leaving them vulnerable to the full impact of recovery costs and potential litigation. Staying ahead of regulatory changes and establishing strong data governance practices is not just a compliance exercise, it is essential for long-term business sustainability and risk management.
Dated: November 6, 2024
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
What a month! In July, Willow welcomed new clients, negotiated definitive agreements for long-standing clients and even made time for some fun on the golf course for a great cause. Here are a few of our favorite highlights:
1. Willow was thrilled to welcome a new corporate client to the firm this month that provides internet connectivity and in-flight entertainment packages to airlines across the globe. Sarah is currently serving this client as general counsel and is thrilled to be a part of such a dynamic company.
2. After several months of strategic planning and negotiation, Willow represented an upstream oil and gas company entering into a trade agreement for the exchange of approximately 400 net leasehold acres with another regional player in the industry.
3. Willow continued to build its intellectual property practice this month by working with a new client in the process of developing an online business. Willow is assisting this client in trademark strategy, design and registration and will be involved in all phases of securing and maintaining trademark protection for the business.
4. Over the past several months, Daniel advised a nonprofit corporation on the process of its dissolution. This was a well-funded organization, and Daniel exercised great care and creativity to ensure the organization’s funding was dispersed in a manner consistent with its charitable purpose, its bylaws and the goals of its leadership team.
5. Sarah and Daniel attended one of their favorite annual charitable events this month – the Medbrook Children’s Charity’s 24th annual Party with a Purpose Golf Classic. The Charity funnels the proceeds of this event directly into community initiatives and organizations providing services, medical assistance and daily necessities to children in need.
Thanks for reading!
Willow wrapped up the first half of 2024 by negotiating a large volume of commercial agreements, welcoming new clients and sponsoring some of our favorite community events. Here are a few of the highlights:
1. Sarah and Daniel represented a private equity client in the review and negotiation of over 100 diligence-related documents this month! These documents included confidentiality agreements, non-reliance letters and click-through agreements and agreements containing other restrictive covenants, such as standstills, non-circumvention agreements and non-solicitation agreements.
2. Willow advised clients on various legal agreements essential for running a business, including closing new credit facilities and negotiating new commercial agreements. Willow strives to understand all aspects of each client’s business to ensure their agreements support their operating goals while mitigating their risk to the fullest extent feasible.
3. Willow on-boarded three new private equity clients this month and are assisting their internal compliance departments with the implementation and maintenance of procedures designed to satisfy and maintain compliance with certain obligations to their investors. Assisting private equity sponsors with their fund-level obligations is one of Willow’s core areas of expertise, and we are always thrilled to assist new clients with these complex issues.
4. Willow was thrilled to sponsor and participate in two of our favorite annual community events this month. Sarah volunteered at the Associated of Businesses of Bridgeport’s Annual Summer Kick-Off Party, with her family joining in the festivities offered along Main Street Bridgeport. Daniel also enlisted the help of his family to volunteer at a water station during the Derek Hotsinpiller Fallen Stars Memorial 5K. Although we serve most of our clients virtually, Willow is committed to giving back to the community in which we live.
5. We are thrilled to share that our summer intern, Ryan Badmaev, accepted a full-time associate attorney position with Willow! Ryan is currently studying for the WV Bar exam but will re-join the firm in September. We are so excited to welcome Ryan to our team on a full-time basis!
Thanks for reading!
Effective January 1, 2024, the U.S. Treasury Department Financial Crimes Enforcement Network (“FinCEN”) established the Beneficial Ownership Information Reporting Requirements Rule (the “BOIR Rule”) to implement certain beneficial ownership information reporting requirements of the Corporate Transparency Act (the “CTA”). The BOIR Rule requires most entities to report certain identifying information about their beneficial owners, unless the entity falls under a list of enumerated exemptions. Although FinCEN is expected to continue to update its interpretation of the BOIR Rule and the CTA, the current interpretation is relevant to private equity fund sponsors who, after conducting an entity-level analysis, may be eligible to avail themselves of an exemption.
Who is subject to the BOIR Rule?
Corporations, LLCs or other entities formed by filing a document with a secretary of state or similar office, as well as foreign entities registered to do business in the U.S. by filing with a secretary of state (collectively, “reporting companies”) are required to file their beneficial ownership information with FinCEN under the BOIR Rule.
The BOIR Rule provides for 23 exemptions from this filing. The primary exemptions relevant to funds include:
– Large Operating Companies – companies that have an operating presence and physical office in the U.S. with more than 20 employees and more than $5 million in U.S. sourced consolidated annual receipts.
– Registered Entities – many entities that are registered with the SEC or subject to federal supervision, such as regulated financial institutions, registered investment advisers (“RIAs”), pooled investment vehicles (“PIVs”) and registered investment companies.
– Subsidiaries of Exempt Entities – subsidiaries of exempt entities that are wholly owned or controlled by an exempt entity are also exempt; however, this exemption does not apply to subsidiaries of exempt PIVs.
What must be reported?
Reporting companies that do not fall under any exemption must report:
– Certain identifying information of the reporting company, including any trade names and its tax identification number.
– Each individual who, directly or indirectly, holds 25% or more ownership or exercises “substantial control” over the reporting company (each, a “beneficial owner”)
– Certain identifying information for each beneficial owner, including residential address and a copy of a valid governmental ID.
When is the filing due?
Entities formed after January 1, 2024 must file within 90 days of formation.
Entities formed before January 1, 2024 must file before January 1, 2025.
Entities that have made an initial filing must file an updated filing within 30 days of any change to any information reported.
Considerations for the Private Equity Industry
Private equity sponsors will need to conduct a top-down evaluation of each entity within the structure of their funds to determine if any such entity is required to file with FinCEN. Although the BOIR Rule provides exemptions for some subsidiaries of exempt entities, the subsidiary exemption does not apply to subsidiaries of PIVs and requires that the subsidiary is controlled or wholly owned by the exempt entity. Due to these limitations, many holding companies and special purpose vehicles will likely be required to file. Similarly, many upper-tier management holding companies and GPs may be subject to filing unless they otherwise qualify for an exemption. Importantly, foreign entities that are not registered to do business in the U.S. are outside the scope of the CTA and not subject to the reporting requirements.
RIAs and Relying Entities
The BOIR Rule explicitly exempts any investment adviser (as defined in the Investment Advisers Act of 1940, (the “Advisers Act”)) that is registered under the Advisers Act with the SEC. Importantly, the exemption does not extend to investment advisors only registered on the state level. Although other exemptions may apply, the RIA exemption requires registration with the SEC.
Additionally, although FinCEN has not provided specific guidance on the topic, the general consensus in the legal community is that “relying advisors” that conduct their advisory business through an “umbrella registration” are also exempt under the BOIR Rule. The SEC rules provide that relying advisors are RIAs in substance, although they are not required to file separate registrations when identified on the affiliate’s Form ADV. Given FinCEN’s reliance on many SEC rules in the BOIR Rule, an inconsistent interpretation would have little regulatory benefit, while introducing undue complexity and ambiguity.
Similarly, certain GPs created by an RIA may also rely on the exemption as a deemed investment adviser if they meet the conditions set forth in the SEC Staff’s 2005 and 2012 no-action letters to the American Bar Association. In relevant summary, the conditions of these letters are (a) the RIA established the entity to act as the fund’s GP, (b) the formation documents designate the RIA to manage the fund’s assets, (c) all of the investment advisory activities of the GP are subject to the Advisers Act and subject to SEC examination, and (d) the RIA subjects the GP and its employees and agents to the RIA’s supervision and control.
Pooled Investment Vehicles
The exemption for PIVs is likely to apply to most funds managed by private equity sponsors, but each fund must clearly satisfy the requirements of the BOIR Rule. The exemption requires that the PIV: (1) is either (a) a registered investment company, or (b) a fund that relies on an exemption under sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 and is (or will be) identified by name in the adviser’s Form ADV; and (2) is operated or advised by a bank, credit union, broker dealer, RIA or venture capital fund adviser (each as defined in the BOIR Rule). A limitation to this exemption is that the vehicle must be listed on the Form ADV. For vehicles that are not listed, the adviser should review the potential implications of listing the vehicle and consider whether the benefits of qualifying for the PIV exemption outweigh the potential downside of identification.
Importantly, the subsidiary exemption in the BOIR Rule does not apply to subsidiaries of PIVs. Direct and indirect subsidiaries of PIVs must independently qualify for a reporting exemption, unless the facts and circumstances of the fund reflect that the subsidiary is controlled by an RIA or other exempt entity. In some cases, if the PIV is wholly owned or controlled by an RIA, certain subsidiaries of the PIV may be deemed to be controlled by the RIA and therefore fall under the RIA’s subsidiary exemption. However, relying on this indirect exemption should be considered on a case-by-case basis for each PIV subsidiary, as the analysis here is dependent on the relationship among the relevant entities.
Subsidiary exemption
The subsidiary exemption under the BOIR Rule provides that “any entity whose ownership interests are controlled or wholly owned, directly or indirectly, by one or more exempt entities” is exempt from the filing requirements. However, the availability of this exemption requires careful analysis of the ownership and control rights that an exempt entity has over the subject subsidiary, as each such subsidiary must 100% owned or 100% controlled by an exempt entity to avail itself of the subsidiary exemption.
Upon a determination that an entity is 100% owned or controlled by an RIA, such entity may avail itself of the subsidiary exemption. However, as noted above, subsidiaries of an exempt PIV are not presumptively exempt from the BOIR Rule. Such subsidiaries must independently satisfy the criteria of an exemption under the BOIR Rule unless they are otherwise wholly controlled by an exempt entity. This determination is highly fact specific and requires a review of both ownership and minority voting rights of such PIV subsidiary.
Due to the fact specific analysis required to rely on this exemption, fund professionals must carefully examine their fund structure from the top down to determine which entities satisfy the subsidiary exemption criteria. Reliance on this exemption should be based on careful consideration alongside trusted legal advisors.
Take Aways
In conclusion, implementation of the BOIR Rule presents unique challenges for the private equity industry. There are several exemptions that apply to private equity fund sponsors; however, due to the nuanced nature of these exemptions and the complex structure of most private equity funds, fund sponsors must carefully evaluate each entity within its fund structure to determine if it satisfies the criteria of an applicable exemption. Although FinCEN continues to refine its guidance, the CTA and the BOIR Rule are in effect now and private equity fund sponsors must be vigilant in determining its current reporting obligations in connection with new entity formations and its upcoming reporting deadlines for existing funds.
Dated: June 12, 2024
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
For Willow, the hallmark of May was certainly helping clients navigate complex legal issues that arise in the ordinary course of their business. Although Willow assisted clients on a few transaction closings this month, Sarah and Daniel spent most of their time in the role of “trusted advisor” by advising on complex corporate agreements, researching state and federal statutes and advising clients on how to operate in a practical and efficient manner while maintaining compliance with various applicable laws and regulations. Here are a few of the highlights:
1. Willow advised key members of a management team on various aspects of its current compensation package in anticipation of upcoming discussions with its board of directors. Willow has many years of experience on corporate governance matters and is poised to review corporate policies and agreements among various corporate stakeholders to help our clients identify key issues and develop a strategy that is defensible and aligned with their goals and the goals of the company.
2. Willow prepared various securities-related documents to facilitate a privately held corporate client in accepting an investment from an international business entity. This investment secures the financing necessary for our client to advance to the next phase of its business model, and we are so excited to be part of their story.
3. In other securities-related work, Willow advised an established investor network on disclosure requirements that may arise in connection with certain investment activities and how to structure investments to fall within an applicable exemption from those disclosure requirements.
4. After assisting a client in the divestiture of substantially all its oil and gas assets earlier this year, Willow assisted this client in the sale of its remaining real and personal property and in the provision of seller-backed financing to the buyer. The combination of these two transactions allowed the sole owner of the business to start what is hopefully a long and healthy retirement.
5. On May 13, Willow celebrated its 5th anniversary of being in business! Here are a few words from Willows’ founder, Sarah Moore.
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As published on January 10, 2024 and effective as of March 11, 2024, the U.S. Department of Labor (“DOL”) abandoned the two-factor test used from 2021 to 2024 to determine if a worker should be classified as an employee or independent contractor of an employer and reinstated the totality-of-the-circumstances test that the DOL used to such determination prior to 2021 (the “totality test”). The totality test requires every aspect of an employer’s relationship with a worker be considered when determining whether such worker is serving an employer as an employee or an independent contractor. The totality test focuses on the following six factors that were first described in U.S. v. Silk (the “Silk factors”):
1. Opportunity for profit or loss depending on managerial skill;
2. Investments by the worker and potential employer;
3. Degree of permanence of the work relationship;
4. Nature of degree of control;
4. Extent to which the work performed is an integral part of the potential employer’s business; and
6. Skill and initiative.
From 2021 to 2024, the DOL rejected the totality test in favor of a test dependent on what the DOL considered to be the “core factors” – the nature and degree of control over the work and the worker’s opportunity for profit or loss. In applying this two-factor test, the core factors were determinative of a worker’s classification. The DOL indicated that even if other factors contradicted the core factors, it would be “highly unlikely” that these non-core factors would outweigh the core factors. In application, the two-factor test typically resulted in less workers being classified as “employee” than under the totality test.
The Fair Labor Standards Act (“FLSA”) defines an employee as “any individual employed by an employer.” In its most recent publication, the DOL justified its reinstatement of the totality test by noting that the FLSA’s definition of “employee” is meant to be broader than what is traditionally found in common law. Historically, under the totality test, courts consistently held that the Silk factors are not exhaustive, and there could be other considerations that may weigh heavily on worker classification. By reinstating the totality test, the DOL will re-emphasize the Silk factors in favor of considering the totality of the circumstances in determining whether a worker should be classified as an employee or independent contractor.
Understanding the applicable test is important for employers because the FLSA provides broad protections for workers defined as employees, such as the Federal minimum wage, mandatory overtime wages, and protections for workers that file complaints regarding unfair labor practices. The FLSA does not provide those protections, however, for independent contractors. Employers should consider all of the Silk factors when structuring their relationships with workers and understand the impact of its workers being classified as an employee rather than independent contractor under the FLSA.
Sources:
89 FR 1638, 86 FR 1168
29 CFR 795.110, 29 CFR 795.105
United States v. Silk, 331 U.S. 704 (1947)
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
Five years ago today, I formed Willow Legal Advisors. My plan was to be a transactional attorney in my home state of West Virginia and to provide corporate legal services to locally owned businesses, as well as private equity sponsors across the country. To my knowledge, there were no other attorneys that had built such a practice, and I confidently believed that I was “filling a hole” in the industry. When I look back on my business plan, list of goals and the numerous iterations of each, I’m surprised by how bold I was. I had never practiced in West Virginia, only Texas; I had never been responsible for sourcing my own work; and, I had spent many years enjoying a “Big Law” salary. Yet, not once did I write words of doubt or failure.
Instead, I used Excel spreadsheets to set various annual salary targets for myself and work backwards to evaluate different revenue goals and operating budgets and, from there, work even further backwards to determine my hourly rate and the average number of billable hours required to make my budget work. I also re-visited my past annual performance reviews and listed my most cited strengths and weaknesses in another file. I used this information to understand and develop my brand and to develop specific accountability practices. This early exercise of defining the quantity and quality of my offered services was imperative to my ability to wake up each day with a sense of direction.
In starting my practice, I was fortunate to have good relationships with clients I supported in Big Law who were confident in my ability to assist them on my own. I was also able to offer lower hourly rates, flat fees and other alternative fee arrangements, while being determined to maintain the same best-in-class level of service to which they were familiar. I believe this early commitment to client care and Big Law standards was the primary driver of the success that followed as it supported better professional habits, more trusted client relationships and word-of-mouth referrals. I learned to be both a business owner and an attorney, both of which are necessary in a small practice.
In short, it worked. However, the firm has grown in many ways I didn’t envision 5 years ago. I have a full-time associate, Daniel, that has been with Willow for over 2 years. In Daniel, I have an exceptional young associate and an ambitious colleague who will undoubtedly support Willow’s continued growth and excellence into the future. We represent businesses coast-to-coast across a variety of industries and are constantly developing new areas of expertise and expanding our offered services to fit our clients’ needs, well beyond my first drafts of Willow’s business plan. This growth has been entirely organic, and we are so grateful to our amazing clients for always supporting our small firm.
I almost let this 5-year milestone pass without acknowledgement. I formed Willow with long-term expectations, so it almost feels inevitable. However, I realize that it wasn’t inevitable. It took courage, dedication and a lot of hard work, and I am so incredibly proud of this firm, my associate Daniel, the clients we serve and the work we perform. The legal industry is changing – from AI and cloud-based services to remote work and fee structures, and Willow will continue to be a small but mighty leader at the forefront of this evolving profession for many years to come.
The past 5 years represent the best professional experience of my life, and I am so excited to see what we build and accomplish over the next 5 years. I have no doubt that it will be a thrilling ride.
Thanks for reading.
~Sarah
For Willow, there was no shortage of variety in April! We provided legal services to Texas and West Virginia-based companies and assisted with transactions in numerous states and countries. We served for-profit and non-profit companies and clients in the oil and gas, water treatment, manufacturing and bio-tech industries. We negotiated numerous types of commercial agreements and assisted with various potential transactions. It was an exciting month, and we are excited to share a few highlights:
1. Willow was thrilled to welcome a new Texas-based bio-tech company as a client this month. As this client grows and takes on new investors, Willow will advise on various securities and governance related legal matters.
2. Willow assisted clients in both Texas and West Virginia in negotiating various commercial agreements, including gas processing agreements, subcontractor agreements and master service agreements. Many of these agreements start as form documents, however, Willow approaches each form with due regard to the actual work being performed to ensure that the agreement reflects the parties’ intent, and that risk is appropriately allocated between the parties.
3. Willow routinely represents private equity clients in the early phases of evaluating potential transaction opportunities and, in April, Willow negotiated over 100 diligence-related documents! These agreements related to private debt transactions as well as equity investment opportunities throughout the country and even the world.
4. Closing transactions and negotiating agreements is essential to Willow’s continued success, however, it is such a pleasure when our clients call us to get our “thoughts on an idea” or to “help prepare for a meeting.” We care so much about the health and well-being of our clients, as businesses and as individuals, and it is the ultimate compliment to be asked to advise on issues beyond the four corners of a legal document. This happened numerous times this month, and we are so grateful to have the trust of our clients.
5. On April 1, Ryan Badmaev joined Willow as a summer associate! Ryan will graduate from WVU Law School in May, and we are eager to have him as part of the team.
Thanks for reading!
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
Attention Small Business Owners:
The Corporate Transparency Act (the “CTA”) requires every business operating in the United States to file certain ownership information, unless otherwise exempt. The CTA went into effect on January 1, 2024 and is estimated to affect approximately 32 million businesses operating in the United States.
The CTA mandates that nearly all business owners report personal identifying information to FinCEN (the regulatory agency tasked with enforcing the CTA) or face fines and possible imprisonment. The CTA broadly encompasses any entity that is created by filing a document with a secretary of state or similar office. Here are a few examples of businesses that may be required to file under the CTA:
• Your side hustle driving for Uber or Instacart
• Your teenager’s car-washing service
• Your solely owned law firm
After a business submits its initial filing, in the event any of the information in the filing changes (such as a business owner changes his or her residential address or obtains a new driver’s license), a subsequent filing is required within 30 days of such change.
If you own or have substantial control over the operations of a business, you need to evaluate if your business is required to file. Given the broad scope of the CTA, it is prudent to initially presume your business is required to report and then evaluate if your business fits within any exemption (such as being a sole proprietorship, non-profit or highly regulated financial institution). Even if a business concludes it is exempt from reporting, it should establish compliance measures to ensure it quickly recognizes if such exemption fails to apply. The CTA requires a formerly exempt business to report to FinCEN within 30 days of such business no longer satisfying an exemption.
To reiterate, all businesses need to assess their obligations under the CTA and implement controls and procedures to ensure current and future compliance with the CTA. All newly formed businesses are required to adhere to the CTA immediately, and all businesses formed prior to January 1, 2024 are required to submit their initial filing by year-end. Failure to comply with the CTA will result in penalties. For more information about the which businesses are exempt and what information will be required for filing, please click here. If a business is unsure about the applicability of the CTA, it should seek professional advice before the applicable deadline passes.
Willow’s first quarter of 2024 wrapped up by closing several transactions and advising on a variety of commercial agreements. Willow loves closing transactions because each one memorializes a client’s vision coming to fruition, and we are always excited to review and negotiate agreements designed to expand a client’s commercial activities. Here are a few highlights:
1. Willow represented a client in the sale of nearly 200 oil and gas wells along with other real property rights. Willow prepared both the sale and financing documents for this seller-financed transaction and was thrilled to be a part of our client’s well-deserved retirement.
2. Willow assisted an oil and gas client on the closing of an acreage trade agreement with another production company. This deal was a bruiser! It was in the works for nearly 18 months, and we were thrilled to hear our client’s relief at finally bringing this one across the finish line.
3. Willow represented a client in the sale of a retail sales business. This business was a passion project straight from our client’s heart, and our client was eager to pass the reins of her thriving store to an energetic group committed to the business’s future expansion and success.
4. On the commercial front, Willow assisted an oil and gas producer in the review and execution of commercial agreements regarding increased recovery of certain natural gas liquids. These sorts of agreements allow production companies to leverage their NGL recoveries in response to favorable commodity pricing and are also indicative of a sophisticated and adaptive management team.
5. Willow assisted a long-time client with the review of several agreements relating to the client’s hedge fund strategies. Willow has traditionally assisted this client with their private equity fund-related agreements and was excited to assist with the client’s hedge fund strategies as well.
Thanks for reading!
We asked our Associate, Daniel Reitz, to share his perspective on what makes our firm different from other firms. Please read below to see what he had to say.
To me, Willow stands out from other firms because our ability to adapt and serve across a diverse range of clients, locations and legal issues. Although we primarily work with businesses, we often develop a strong relationship with the owners and other members of the team. Through these personal contacts we frequently get the opportunity to assist these individuals with matters that may be unrelated to the corporate client, such as real estate transactions or estate planning. Further, being primarily a virtual firm, we can (and do) represent clients across the country, and it has been a rewarding experience to work closely with clients with differing life experiences and insights (even though we may be separated by geography). The varied clients with various issues have created a culture of constant learning for us, which pushes us to continually increase the value we are able to provide going forward. We have an expectation that we will continually learn new skills and find ways to become better attorneys: a pursuit which helps ward off any monotony that may come from being a stuffy lawyer.
– Daniel
When it comes to leasing commercial real estate, both landlords and tenants seek arrangements that are fair, sustainable and beneficial for both parties. The triple net lease is a common arrangement in commercial real estate transactions. This type of lease has distinct characteristics that set it apart from traditional leases, offering advantages and considerations that both tenants and landlords often find mutually beneficial.
Triple Net Lease Basics: How They Work
A triple net lease, often abbreviated as NNN, is a type of lease agreement commonly used in commercial real estate, especially for properties like retail spaces, office buildings and industrial facilities. Unlike traditional leases, where the landlord bears responsibility for ordinary course property expenses, triple net leases shift a significant portion of these expenses to the tenant.
The “triple net” in the lease refers to three main categories of expenses that the tenant agrees to cover: property taxes, insurance premiums and property maintenance. The tenant is responsible for paying property taxes assessed on the leased space, including any increases in property taxes during the lease term. Additionally, the terms of the lease will require the tenant to obtain and maintain insurance coverage for the leased premises. This often includes property insurance, liability insurance and other specific coverage that the landlord may require. Perhaps the most significant aspect of a triple net lease is the tenant’s obligation to cover maintenance and repair costs for the property. This can include everything from routine maintenance to major structural repairs, depending on the terms of the lease.
In a triple net lease, tenants typically pay a base rent, which is a fixed amount, in addition to the three categories of net expenses. The base rent is generally lower than what may be negotiated in a gross lease, in which the landlord covers routine property expenses. However, the cumulative effect of the three net expenses typically makes a NNN lease financially comparable to a gross lease.
Advantages of Triple Net Leases
One of the primary advantages for landlords is the predictability of income. With tenants responsible for property-related expenses, landlords receive a consistent stream of income, and unexpected costs are largely shifted to the tenants. Landlords benefit from reduced exposure to the unpredictable nature of property expenses. With tenants responsible for these costs, landlords can better forecast their financial commitments and allocate resources accordingly. Additionally, triple net leases often involve less day-to-day management for landlords. Because tenants are responsible for property maintenance and repairs, landlords can have a more hands-off approach, focusing on large-scale property management and strategic planning.
Tenants, especially those with experience and financial stability, may appreciate the control and responsibility that come with a triple net lease. Triple net leases often have longer terms, providing tenants with stability and security in the premises. For businesses looking for a long-term location, this stability can be crucial for planning and growth. Generally, triple net leases allow the tenant to have more say in property maintenance, improvements and even construction of the premises, allowing them to ensure the space meets their specific needs and is customized to better suit their operational needs. Due to the longer term and other benefits to the landlord, a triple net lease may result in a lower overall cost than the tenant could find otherwise, especially if the tenant proactively controls the overhead expenses of maintaining the property. Although a triple net lease may mean more administrative burden for the tenant, many commercial tenants find that the benefits from the greater stability and flexibility outweigh the drawbacks within such an arrangement.
Potential Drawbacks in Triple Net Leases
Triple net leases may pose challenges for landlords in finding a creditworthy tenant willing to commit to a long-term lease, which may result in longer vacancy periods. Because tenants are responsible for the property taxes, insurance and maintenance of the property, finding a tenant with a solid financial standing is crucial for the landlord. However, attracting such tenants can be demanding and the landlord may need to expend additional time and resources to vet the suitability of a prospective tenant. Additionally, the flexibility often granted to tenants in triple net leases for certain property modifications and changes may be undesirable for the landlord. While some alterations might enhance the property’s value, others may have adverse effects or be unsuitable for the next tenant. Striking the right balance between accommodating tenant needs and safeguarding the property’s long-term value requires careful negotiation and a comprehensive understanding of the potential implications of the lease terms.
For tenants, a potential disadvantage of a triple net lease is the exposure to variable expenses associated with the property. Because tenants are responsible for covering property taxes, insurance and maintenance costs, they may face unpredictable and potentially escalating expenses. This lack of cost predictability can make it challenging for tenants to budget effectively. Further, the responsibility for paying such costs and maintaining the property will result in additional time that the tenant will need to expend on such administrative tasks. Despite these challenges, tenants can benefit from the potential cost savings in base rent and the opportunity to negotiate lease terms that align with their business needs, fostering a mutually beneficial and transparent landlord-tenant relationship.
Legal Considerations in Triple Net Leases
While triple net leases offer benefits for both parties, navigating the legal landscape is crucial to avoiding disputes and ensuring a fair arrangement. A well-drafted lease is essential to avoiding misunderstandings and legal disputes. Given the substantial shift a triple net lease makes in the rights and responsibilities between the tenant and property owner, it is crucial that the parties have a similar understanding of the terms and goals of the arrangement. The language in a triple net lease must clearly outline the responsibilities of both parties, specifying what expenses fall under each of the three nets. Furthermore, in scenarios where multiple tenants are leasing the premises, the lease must clearly allocate the responsibilities among the tenants and their respective shares of the costs. The process of negotiating the terms of the lease should ensure fairness and transparency from the beginning of the relationship.
Before entering a triple net lease, both landlords and tenants should conduct thorough property inspections to identify any existing issues or potential maintenance challenges. The lease should address how such actual or potential issues will be handled, including who is responsible for addressing them and the timeline for resolution. Additionally, the lease should outline contingency plans to address unforeseen circumstances. For example, if a major repair is needed, the lease should specify how the costs will be divided or if there are caps on the tenant’s contributions to such a repair. It is crucial for the parties to clearly define what property expenses are eligible to pass-through to the tenant and how they will be calculated. Tenants should pay attention to these provisions to be aware of all costs, including any janitorial, security or supply costs that may be allocated to the tenant.
All leases, including triple net leases, must comply with local laws and regulations governing commercial real estate. Working with legal professionals familiar with local statutes when drafting and negotiating can help ensure the lease is legally sound.
Conclusion
Triple net leases offer a collaborative approach to commercial real estate leasing, providing advantages for both landlords and tenants. While offering many benefits, they also come with specific considerations that require careful attention. A well-crafted triple net lease, backed by thorough legal review and understanding, can pave the way for a mutually beneficial and lasting commercial real estate relationship. Given the long-term relationship that is contemplated by such leases, the parties should work toward the mutually beneficial goals of such an arrangement through transparency in both the negotiation and operation of the lease. As with any legal document, seeking professional advice is paramount to ensure that the terms are fair, enforceable and in compliance with applicable laws.
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
Sarah and Daniel started January focused on firm-planning and organizational improvements and ended the month working on several transactions for newly onboarded clients. It was a fun month of growth for Willow! Here are a few of the highlights:
1. Willow implemented a new document management system to store its firm and client files on an organized and secure cloud-based server. This may not sound too exciting; however, this is a huge milestone for Willow, and we are thrilled to be using a sophisticated system that adds efficiency to our work product and significantly improves internal communication.
2. Willow updated an oil and gas client’s form of master service agreement in response to recent litigation and changes in market norms. While many companies adopt forms without making routine updates, we ensure our clients are aware of changes in the legal landscape so they can decide when changed circumstances support amending or replacing form agreements.
3. Willow assisted a new client in the sale of nearly 200 oil and gas wells along with other real property rights. As this deal is seller-financed, Willow prepared both the sale and financing documents for the transaction, which will close in February.
4. Willow assisted a long-time corporate client in adopting certain governance policies that promote better transparency among members. Willow also assisted this client in preparing documentation to support its effort to become a certified women-owned business.
5. Sarah had a blast judging the first round of the inaugural Ignite WV Competition. The finalists will compete in April during Bridging Innovation Week and, in the meantime, will go through trainings, mentoring and benchmarking with the goal of being awarded $100,000 or more (depending on need) of technical assistance funds in the final round of the competition.
Thanks for reading!
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
The beginning of a new year is often a time of making resolutions and planning for the future. At Willow, we believe it is equally important to reflect on the lessons learned and achievements earned in the past, as these provide valuable insight on the direction one is heading. Please read below to see what our attorneys, Sarah and Daniel, had to say about their most memorable projects from 2023.
From my perspective, Willow’s most memorable transaction in 2023 was its representation of a corporate client in entering a $100 million, asset-backed credit facility. This was a challenging transaction. Not only were the documents and legal components of the deal highly complex, but the transaction also required coordination among several law firms representing various interested parties, all while raising interest rates and market uncertainty created a tough landscape for companies seeking private debt. Also, this transaction was incredibly important to our client, who intended to use the loan proceeds to partially finance its growing drilling program in Appalachia. Knowing this, we spent many evening and weekend hours working on this deal to ensure that our client was never the cause for delay and to demonstrate our and our client’s professionalism to all parties involved. To me, as Willow’s founder, this transaction was incredibly fulfilling as it showcased our ability to work on sophisticated transactions involving complex legal issues, large international law firms and pressing deadlines while navigating a tough credit market.
–Sarah
For myself, what stands out looking back on 2023 is not so much a single transaction, but rather the many projects I worked on for our private equity clients. When I joined Willow, I had very limited knowledge of the workings of private equity. Although Sarah has continually coached me on my private equity practice development, it was really not until this past year that I truly grasped many of the intricacies of the industry. Throughout the year, I had the opportunity to assist a number of our clients implement internal controls and processes to monitor and maintain compliance with their funds’ governance documents. Working with many different limited partnership agreements and side letters truly heightened my understanding of the concerns and needs of both funds and investors alike. The work our firm performed required that I understand not only the legal aspects of the documents, but also the practical ramifications to our clients. This repeated hands-on experience—coupled with Sarah’s readiness to thoroughly discuss any question I had—fostered a level of professional growth that is unmatched throughout my career. The reason all this stands out to me as my biggest success of 2023 is due to my satisfaction of looking back at the growth in my personal understanding of the private equity industry and the excitement of looking forward to new projects on the horizon that will continue to push my professional development. On a broader scale, I think my experience also speaks to Willow’s dedication to continuous learning and innovation in order to assist our clients achieve their goals.
–Daniel
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
Introduction
In today’s business landscape, trademarks are invaluable intellectual property for businesses, enabling them to distinguish their products and services from competition in an ever increasingly competitive market. A trademark is a symbol, word, phrase, or design that identifies and represents a brand, making it instantly recognizable to consumers. Although, to some extent, trademark protection arises automatically when a business uses a mark in commerce, the process of registering a trademark with the United States Patent and Trademark Office (USPTO) offers numerous advantages and protections to a business.
Legal Protection & Exclusive Rights
One of the primary reasons for registering a trademark with the USPTO is to establish legal protection. A registered trademark provides its owner with exclusive rights to use the mark for its goods or services and protects its owner against unauthorized use or infringement by competitors. In the event a third party infringes upon a trademark, the legal process for an owner to assert its rights and stop further infringement is much more streamlined (and less expensive) when the trademark is registered as compared to when the trademark is unregistered. This legal protection safeguards the brand’s identity and empowers a business to protect its reputation, consumer trust, and market share. Protecting intellectual property is an essential component of any business’s strategy for safeguarding and strengthening its identity in the marketplace.
Confirmation of Ownership
In connection with the trademark registration process, the USPTO confirms that the mark being registered is not confusingly similar to any other registered trademark and thereby is owned exclusively by the registered owner. This assurance protects the owner from claims of infringement by other trademark owners (whether registered or unregistered) and ensures that the brand can create and leverage its own reputation without fear that it will be confused with similar products or services. Additionally, many companies in the online marketplace, such as Amazon, Facebook, and Google, have processes in place to protect a registered owner’s trademark from third-party infringement, without the need to file a lawsuit.
Enhanced Credibility and Market Value
A registered trademark is not just a legal asset; it is a symbol of a business’s credibility and professionalism. It signals to consumers, partners, and investors that a company is committed to protecting its brand and its reputation. The added layer of trust generated by a registered trademark can be pivotal in building strong relationships and fostering consumer confidence, leading to increased loyalty and sales. A registered trademark is also an intangible asset that adds to business value. It demonstrates the company’s commitment to brand protection, which, in turn, can make it a more attractive prospect for investors, potential buyers, or strategic partners. A strong and protected brand identity can open new avenues for growth, investment, and expansion, enabling businesses to seize emerging opportunities and secure their place in the market.
Additional Benefits
Conclusion
Registering a trademark with the USPTO is a strategic decision that offers numerous advantages for businesses. It provides legal protection and market credibility, deters against potential infringement and enhances the brand’s market value. As the business landscape becomes increasingly competitive, trademark registration is an essential step in securing a brand’s future and protecting its intellectual property. Businesses that recognize the importance of this safeguard can navigate the challenges of the marketplace with confidence, ultimately strengthening their position and reputation in the eyes of consumers and competitors alike.
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
For our firm, December is usually spent helping our clients finalize projects by year-end and taking some time to enjoy the holiday season with our families. This year was no exception! Below are a few of the highlights from December at Willow Legal Advisors.
1. Willow advised an oil and gas company with operations in Appalachia on its sale of certain oil and gas properties located in both Doddridge and Harrison County, West Virginia. In connection with the sale, Willow’s client divested itself of several shallow gas wells while retaining its deep leasehold rights. This transaction was executed on a rapid timeline to achieve the client’s goal of closing before year-end. The parties were thrilled to close well-before Christmas, and Willow was excited to assist.
2. Willow assisted a DC-based private equity sponsor with wrapping up its MFN election process by reviewing the elections made by the fund’s existing limited partners and preparing procedures designed to ensure that our client complies with its reporting obligations to investors. The implementation of MFN elections is a tedious and overwhelming task, but Willow has vast experience with, and a deep understanding of, fund compliance issues and is always thrilled to be part of the process.
3. Willow loves advising small businesses on the various random legal issues that inevitably arise from time to time when running a business. These issues are often distracting and, frankly, annoying to our clients, and we are happy to be able to take them off our clients’ plates so that they can focus on their daily operations. This month, Willow did just that by assisting a client with a nagging, unresolved insurance claim from a Spring 2023 incident. Willow has sent letters, had phone calls, drafted damage summaries and taken whatever steps necessary to ensure our client is made whole from an insured incident, and our client was relieved to know that we were handling it while he and his team focused on business operations.
4. On December 16, Willow participated in the annual Wreaths Across America service at the Grafton National Cemetery. Although Sarah and Daniel had participated in this event in prior years, this was the first year that Sarah and her family had the honor of placing a wreath on her father’s grave marker where he was laid to rest in 2023. Willow also had the pleasure of supporting a daughter of one our clients who successfully raised enough funds to sponsor 1,700 wreaths! We are so proud of her and were honored to participate in such an important, thoughtful event.
5. Finally, the Willow team had a lovely holiday dinner at Wonder Bar Steakhouse. Sarah and her husband, Craig, and Daniel and his wife, Emily, had a perfect evening with great conversation and awesome food – although they missed Ashley and Dustin who were celebrating the holidays with family at Disney!
If you are curious about the MFN election process mentioned above and other private-equity basics, please feel free to browse our online private equity glossary: Private Equity Glossary | Willow Legal Advisors.
Thanks for reading!
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
The Corporate Transparency Act (CTA) will go into effect on January 1st, 2024. The purpose of the CTA is to prevent money laundering through shell companies by requiring current and future businesses to comply with new reporting requirements regarding their beneficial ownership. Although the CTA offers a number of exceptions from these reporting requirements, many small- and medium-sized businesses will be required to comply with the new reporting requirements or will be subject to severe penalties.
The CTA mandates that every corporation, limited liability company, or other entity created by state filings (such as limited partnerships) file the required reports to the Financial Crimes Enforcement Network (FinCEN), unless they qualify for an exemption. These exemptions include:
If a business does not qualify for any of these exemptions, it will be required to satisfy the CTA reporting obligations. Businesses formed after January 1, 2024, must file their initial report within 30 days of formation; however, FinCEN offers a grace period for businesses that were formed before January 1, 2024, these businesses must file their initial CTA report by January 1, 2025. After a company submits its initial report, if any of the reported information changes (including beneficial owner information), the company must report the change within 30 days. Similarly, if a reporting company has a change in its reporting status, such as becoming exempt from reporting as a “large operating company”, it must also report this change within 30 days.
Under the CTA, companies must report specific identifying details of their “beneficial owners.” A beneficial owner is an individual who, directly or indirectly, holds 25% or more ownership of the company or exercises “substantial control” over the reporting company. Most small business owners will be deemed “beneficial owners” due to the 25% ownership prong of the definition. However, the determination of substantial control may require analysis of additional factors, including whether an individual is a senior officer of the company, whether such individual has the power to appoint or remove officers or directors of the company, or whether such individual influences important company decisions, such as selling company assets or entering into contracts on behalf of the company. The rules promulgated by FinCEN provide additional indicators and examples of substantial control, however the rules do not cover all facts and circumstances. If a company has any questions about whether an individual has “substantial control” of the company, it should consult a corporate attorney for advice. Additionally, entities cannot be the beneficial owners under the CTA; therefore, any interest or control held by an entity is attributed to the ultimate individual beneficial owner(s) of that entity.
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.
