Understanding PREP Act Liability Protections in the Fight Against COVID-19

Enacted in 2005, the Public Readiness and Emergency Preparedness (PREP) Act authorizes the Secretary of Health and Human Services (HHS) to limit legal liability for those who administer “countermeasures” during a declared public health emergency. The purpose of the Act is to encourage the quick and efficient development and deployment of countermeasures—like equipment, diagnostics, treatments, and vaccines—during a public health crisis, like the current COVID-19 pandemic.

Federal Reserve Establishes New Term Asset-Backed Securities Loan Facility

On March 23, the Federal Reserve announced a series of efforts to address ongoing financial uncertainty in the face of COVID-19. One such effort is the establishment of the new Term Asset-Backed Securities Loan Facility (the TALF) authorized by Section 13(3) of the Federal Reserve Act. The facility is designed to support the flow of credit to consumers and businesses through securitization. The TALF will enable the issuance of asset-backed securities (ABS), including securities backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration and other eligible assets.

Nationwide Trend: Workers Must Cover Up at Employers’ Expense

On April 3, 2020, the Centers for Disease Control and Prevention (CDC) recommended that all individuals wear cloth face masks in public, and where social distancing measures are difficult to maintain. The CDC advises that use of cloth face masks will slow the spread of the virus and help prevent asymptomatic and pre-symptomatic individuals with COVID-19 infections from transmitting the virus to others. Across the United States, an increasing list of governors and mayors are making that recommendation into a requirement.

Practical Considerations for Navigating UK Company Law Matters during COVID-19

The social distancing measures implemented by the government in response to the COVID-19 pandemic have prompted many businesses to adapt their daily practices and governance at relatively short notice. This briefing considers some practical and logistical considerations that can assist companies and their directors and officers in navigating the management of the business during this rapidly evolving period.

COVID-19 and the Migration to SAP S/4 HANA

In October 2014, SAP announced that it would discontinue mainstream maintenance on its Business Suite 7 software at the end of 2025. This deadline forces SAP customers that wish to remain on a supported version of SAP ERP to migrate to S/4 HANA. S/4 HANA is SAP’s new generation of ERP software that consists of SAP’s core product set and an in-memory database solution.

CARES Act Expands Eligibility Under the Small Business Reorganization Act: What Distressed Small Businesses and Their Creditors Should Know

The Small Business Reorganization Act of 2019, which created Subchapter V of chapter 11 of the Bankruptcy Code, became effective on February 19, 2020 (11 U.S.C. §§ 1181-1195 “Subchapter V”). Subchapter V was intended to mitigate perceived challenges faced by small business debtors, with no more than $2,725,625 in debt, in traditional chapter 11 cases. In response to the COVID-19 crisis, the CARES Act expands Subchapter V eligibility for a period of one year (or longer if extended by Congress) by increasing the cap to $7,500,000 in aggregate secured and unsecured non-contingent and liquidated debt. Widespread distress and decreased asset values along with the subchapter’s debtor-friendly rules likely will make Subchapter V an even more attractive option for larger than originally-contemplated businesses who seek to benefit from its short timeline (debtors must file plans of reorganization within 90 days), its reduced administrative expense (there is no disclosure statement to prepare and pay for, no creditors’ committee to fund, and no administrative fees to be paid to the United States Trustee), and its elimination of the “absolute priority” rule (owners can retain their equity in a Subchapter V small business over the objection of a class of unsecured creditors, without paying those creditors in full).

Commercial Construction during COVID-19: CISA Expands its Guidance

As noted in Construction During COVID-19: Is It Essential?, CISA issued an advisory memorandum and guidance on what services should be considered as a part of the “Essential Critical Infrastructure Workforce.” CISA’s purpose in issuing the guidance was to “help state and local officials as they work to protect their communities, while ensuring continuity of functions critical to public health and safety, as well as economic and national security.” Because many states reference or incorporate the CISA guidance into their own state executive orders and directives, it is important to stay up to date on provisions relating to construction. Moreover, some states incorporate a specific version of the CISA guidance and may continue to rely on older versions of the guidance until adopting the later guidance. (For example, in Indiana, Executive Order 20-08 initially ordered the closure of non-essential businesses and referenced the original CISA guidance. Executive Order 20-18 superseded Order 20-08 and, among other things, referenced the CISA guidance that was updated on March 28. In contrast, Florida’s Executive Order Number 20-91 attaches CISA Guidance 2.0 but specifically incorporates “and any subsequent lists published” by CISA.)

Maryland Now Requires the Use of Face Coverings and Physical Distancing Measures at Retail Establishments

On April 15, 2020, Maryland Governor Larry Hogan issued Order No. 20-04-15-01 requiring the use of face coverings when on public transportation or inside of retail or foodservice establishments. The order also requires that retail establishments implement certain physical distancing and public health measures to the extent possible. While the order is effective immediately, the face covering requirement goes into effect at 7:00 a.m. on April 18, 2020. As with prior orders, failure to comply constitutes a misdemeanor subject to imprisonment (not exceeding one year), or fines (not exceeding $5,000), or both.

OSHA’s Interim Enforcement Plan for COVID-19

Although the Occupational Safety and Health Administration (OSHA) issued “Guidance on Preparing Workplaces for COVID-19” on March 9, 2020, critics noted the guidance is “advisory in nature” and does not create “new legal obligations.” After issuing four memoranda specific to respiratory protection and the N95 facepiece, OSHA is now turning its attention to enforcement in a response plan designed to address reports of COVID-19-related workplace hazards.

Distressed Real Estate during the Coronavirus Pandemic: Conducting a Mezzanine Loan Foreclosure Under the UCC

Many leveraged real estate projects are under increased strain due to the economic fallout from the coronavirus pandemic. For mezzanine lenders—including the mezzanine lender who is no longer willing to forbear or the mezzanine lender who has always had a “loan to own” view of its mezzanine loan—this circumstance may mean pursuing remedies under the UCC. While there are differences in states’ enactments of and case law interpreting the UCC (and other laws that may supplement or supplant the UCC), the following general principles apply to an exercise of remedies under the UCC.

Navigating Bankruptcy Exposure for Landlords Arising from Anticipated Lease Terminations During COVID-19

With an unprecedented number of commercial real estate tenants not paying rent and potentially defaulting under their leases, many landlords and tenants may soon be entering into forbearance agreements that defer payment of rent and other financial obligations. The longer the COVID-19 crisis continues without tenants generating revenue due to business interruption and with rent and other expenses accruing, the more difficult it will be for tenants to restart their businesses and pay months of accumulated liabilities. Eventually, the focus for some landlords will shift from rent deferral to lease terminations. This alert identifies a potential, but very real, unintended consequence for landlords if the tenant files for bankruptcy after a lease termination, and offers potential solutions, recognizing that a one-size-fits all remedy does not exist.

Texas Restricts Evictions Due to COVID-19: Landlord Considerations

On April 6, in response to the COVID-19 pandemic, the Texas Supreme Court issued Emergency Order 9, which extends its previous Emergency Order 4 prohibiting any trial, hearing or other proceeding in an eviction to recover possession of residential property under Chapter 24 of the Property Code and Rule 510 of the Texas Rules of Civil Procedure until after April 30, 2020.

New CDC Interim Guidance for Essential Employees

While most of the country continues under “stay at home” orders, “essential” or “critical infrastructure” employees remain exempted. Yet, as outbreaks of COVID-19 are occurring throughout the country, “essential” businesses are not immune to infection, presenting risks for the workforce and the continuity of these businesses. Indeed, media reports have highlighted several “essential” businesses with outbreaks, resulting in large numbers of critical employees being absent in some areas, such as law enforcement and health care, and shutdowns of essential production, manufacturing and food supply operations. The CDC’s new interim guidance means to respond by providing updated protocols for “essential” businesses needing to ensure a sufficient workforce while better managing risks to employees and people interfacing with essential personnel. As discussions begin across the country about the lifting or modifying of stay-home orders, businesses should look to these guidelines as minimum standards to begin preparing their workplaces for a new normal.

Despite COVID-19 Challenges, No Extension of Form CRS Compliance Date for Investment Advisers

In an effort to provide retail investors clarity regarding their relationships with their investment advisers and the supervised persons of those investment advisers, the Securities and Exchange Commission (SEC) adopted new rules which require investment advisers that are registered with the SEC to provide a relationship summary pursuant to Form CRS and rule 204-5 under the Investment Advisers Act of 1940, if they have retail investors. A retail investor is a natural person, or the legal representative of such natural person, who receives or seeks to receive investment advisory services primarily for personal, family or household purposes. Investment advisers’ relationship summaries are required to be filed electronically through the Investment Adviser Registration Depository (IARD), posted on the advisers’ websites (where such websites exist) and delivered to the advisers’ retail investors. A new part 3 of Form ADV describes the requirements of the relationship summary. For additional information regarding Form CRS and related requirements see the SEC’s final rule.

Technology is Not Immune to COVID-19 Cyber Fraud

Crisis fuels crime: in this case, cybercrime. The coronavirus (COVID-19) global pandemic has created a virtual environment ripe for cyber fraud. Social distancing means an exponential rise in the use of technology for work, education, and leisure. Further, decreased human contact reduces the effectiveness of normal mechanisms of confirming that electronic requests are legitimate. In response, U.S. and international agencies have issued a slew of warnings about governmental impersonators using the pandemic to steal money and personal information or to distribute malware. As of the date of this article, current guidance on the most prevalent cyber threats and mitigation strategies is summarized below.

National Landscape of COVID-19 Eviction and Foreclosure Moratoriums Continues to Shift

As the COVID-19 pandemic continues to halt daily life across the United States, orders limiting various real estate remedies have been issued by leaders at every level of government. Some governors, such as California Governor Gavin Newsom and New York Governor Andrew Cuomo, have ordered statewide moratoriums on certain evictions for the pendency of the state of emergency. Other states’ courts, such as Texas and South Carolina, have halted any judicial foreclosure and eviction proceedings statewide. These orders vary in which types of tenants are protected, from covering residential, commercial and industrial tenants, to only residential tenants whose non-payment of rent is due to lost income resulting from the COVID-19 pandemic. Many counties and cities have also issued their own moratoriums, adding to the uncertainty of what protections there are in place fortenants and borrowers. Finally, many of these moratoriums are operating on uncertain timelines, expiring in 30 days or lasting the pendency of a separate state of emergency declaration.

Protecting Shareholder Rights During the COVID 19 Pandemic

Many companies have been hit hard by the coronavirus pandemic and the ensuing quarantines and social distancing, especially those operating in the real estate, hotel, airline, retail, restaurant, and oil & gas industries. Investor uncertainty regarding the impact and duration of the current pandemic has led to extreme market volatility, resulting in current trading prices for many companies that do not reflect their long-term values. This can make companies potentially vulnerable to coercive or abusive takeover tactics or activism by those seeking to acquire significant share positions at currently depressed prices, and who may not have long-term stockholder value as their primary goal. Companies whose stock has been negatively impacted by the recent market volatility should consider preparing rights plan materials and either adopting or placing them “on the shelf” for future implementation on very short notice if the need arises.

Fraud and the Risk of FCA Litigation in the Time of COVID-19

The FCA Remains the Most Powerful Anti-Fraud Tool in the Government’s Arsenal
The most potent weapon in combatting corporate fraud against the U.S. government has been the False Claims Act (FCA), 31 U.S.C. §§ 3729-3733. That fraud most often involves false statements and false or fraudulent claims for payment from the government (31 U.S.C. § 3729(a)(1)). There is also a “reverse false claims act” provision, which imposes liability for improper conduct aimed at avoiding paying the government or improper retention of an overpayment by the government (31 U.S.C. § 3729(a)(1)(G)). Since 1987 the government has recovered over $59 billion, with $3 billion being recovered in 2019.

Distressed Real Estate During the Coronavirus Pandemic: Tips for Negotiating Forbearance Agreements

The coronavirus pandemic, stay-at-home orders and social distancing have put unprecedented strains on borrowers—hotels are closed or barely operational, retail properties are shuttered, tenants are not paying rents (and, in many jurisdictions, shielded from eviction)—yet owners must continue to meet their debt service payment (and other) obligations and fund their required reserves. In addition, the impact of Covid-19 on property valuations will likely result in borrowers failing to meet debt service, debt yield, loan-to-value or similar financial covenants.

Cookies and Tracking Under Increased Scrutiny as Irish Data Regulator Issues New Enforcement Guidance

Businesses tracking website visitors and customers via cookies and other techniques are reminded that this is an area of increased scrutiny and many prior practices won’t be acceptable. Regulators have signalled changes need to be made to comply and they will increase enforcement.

Treasury and Fed launch $600 Billion Main Street Lending Program

As part of the $2.2 trillion CARES Act, today the Treasury Department and Federal Reserve announced two new lending programs—the Main Street Business Lending Program and the Municipal Liquidity Facility—as well as additional investment in and expansion of three emergency lending programs created by the Federal Reserve late last month. Interested parties have been invited to provide comments on the programs before officially launched sometime next week.

CARES Act and FFCRA Revenue Stream Options for Nonprofit Organizations

Nonprofit organizations have avenues to obtain significant financial relief under the provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a $2.2 trillion stimulus package enacted on March 27, 2020, designed to address the widespread economic disruptions caused by the COVID-19 pandemic. Many nonprofit organizations are facing acute financial strain as they work to navigate the unprecedent challenges posed by the pandemic. In addition, many nonprofit organizations will need to comply with the requirements of the Family First Coronavirus Response Act (FFCRA), which provides paid leave administered by employers but funded by the federal government. Nonprofit organizations should review their eligibility for three key CARES Act provisions and the FFCRA.

COVID-19 Relief: SBA Issues Regulations & Guidance on the Payroll Protection Program

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed on March 27, 2020, sets aside $349 billion for Paycheck Protection Loans, which are available through banks, credit unions and other lenders (and guaranteed by the government) and allows for forgiveness of certain amounts. We summarized the Act’s small business loan provisions here; and what funds, corporate investors and their portfolio companies should know about eligibility for the payroll protection program here.

FCC Moves Forward with COVID-19 Telehealth Program

On April 2, 2020, the FCC established the COVID-19 Telehealth Program, which will guide the disbursement of $200 million to health care providers for connected care services to their patients. We published our summary of the Program on April 3, 2020. As discussed in our summary, the FCC delegated to its staff the development of the procedures to disburse the funds.

Face Masks Now Mandatory in Los Angeles

On April 7, the City of Los Angeles issued a Worker Protection Order (WPO) as a follow-up to the city’s March 19 Safer at Home Order. Based on the outsized risk of exposure to the COVID-19 virus faced by many workers of essential businesses, the WPO states that each employee of the following types of essential businesses must wear a face mask or face covering:

Stay at Home, Louisiana: Certain Nonessential Businesses Temporarily Closed

Performing an “Essential Activity”
Following an earlier declaration of a statewide public health of emergency and subsequent additional measures, on March 22, 2020, Louisiana Governor John Bel Edwards issued a Stay-at-Home Order instructing all Louisiana residents to shelter at home unless they are performing an “essential activity.” On April 2, 2020, Governor Edwards extended his Order until April 30, 2020. Under the Order, all nonessential businesses are temporarily closed.

Distressed Real Estate During the Pandemic: The Importance of Pre-Negotiation Agreements for Borrowers and Lenders

Many industries, including the real estate, hotel, airline, retail, restaurant and oil & gas industries have been especially hard hit (some indeed devastated) by the coronavirus pandemic, the ensuing quarantines and social distancing. Projects that were already troubled may be “pushed to the edge”—many real assets and borrowers will need “breathing room” so that they can withstand this dramatic downturn and potentially be in a position to “restart” when the economy “restarts.”

A Single Asset Bankruptcy from the 1990s Gains New Relevance during COVID-19

This is the first in a series of alerts on insolvency topics affecting single asset and other real estate projects. We have selected the present topic because it may provide lessons for real estate projects with no or severely reduced cash flow (a condition many projects find or will find themselves in due to the impact of COVID-19). Single asset real estate debtors have always confronted unique challenges in chapter 11, and those challenges increased when Congress imposed the requirement (with limited statutory exceptions) that the debtor, within 90 days of the order for relief, either commence interest payments or file a plan reasonably susceptible to confirmation. We will examine the nuances of these provisions and other challenges confronting debtors and lenders, in future alerts.

Michigan Issues Stronger Stay-Home Order to Protect Public Health

On Friday April 3, 2020, Michigan Governor Gretchen Whitmer issued Executive Order 2020-36, strengthening her previous “stay home, stay safe” order to protect workers who stay home due to COVID-19 symptoms, effective immediately.

COVID-19: DOL Issues Temporary Final Rule on Expanded Paid Sick and Family Leave Entitlements

As one of the first emergency legislative efforts to combat COVID-19, the FFCRA raised many questions when it was first introduced in mid-March 2020 (as summarized in Pillsbury’s March 18, 2020 client alert). Prior to its April 1, 2020 effective date, the DOL addressed some uncertainties by publishing answers to various FAQs, which continue to be updated regularly. On April 1, 2020, the DOL published 124 pages of Final Temporary Regulations, providing additional guidance for employers regarding the FFCRA. These regulations provide answers to many outstanding questions and, in some instances, contradict prior guidance. (State and local regulations may provide employee protections and employer obligations that differ from, and are in addition to, FFCRA entitlements. Please consult with counsel to confirm whether any state or local statutes or regulations impose additional or different obligations than those discussed here.)

IRS Issues FAQs and Form 7200 for Advance Payment of COVID-19 Employer Tax Credits

As noted in Pillsbury’s Client Alerts issued on March 18, 2020, March 25, 2020 and March 27, 2020, the federal Families First Corona Relief Act (the FFCRA) requires that certain private employers with fewer than 500 employees provide up to 80 hours of additional paid sick leave to employees who are unable to work due to isolation or quarantine orders or advisories, or because they must care for a child due to COVID-19 precautions. The FFCRA also requires employers with fewer than 500 employees to provide up to an additional ten weeks of paid family and medical leave to care for a child whose school or childcare provider is closed due to COVID-19 related concerns.

Texas: State and Local COVID-19 Social Distancing Measures

The COVID-19 pandemic has proved that, in Texas, the “roving, roiling debate over local control of public affairs has not, with increased age, lost any of its vigor.” City of Laredo v. Laredo Merchants Assoc., 550 S.W.3d 586, 588 (Tex. 2018). Although the majority of states across the country have issued statewide Shelter-in-Place or Stay-Home orders, Texas has demurred, initially altogether, deferring to counties and cities to use their own executive authorities as they deemed necessary, and then coming along in substance while eschewing the “stay-home order” characterization.

The Treasury Loan Window Is Opening: Are You Ready?

As reported in our March 30 alert, the CARES Act (H.R. 748) was signed into law on March 27, 2020. The Acts appropriates $500 billion to aid mid-sized and large businesses, the aviation industry, and businesses “critical to maintaining national security.” The Treasury Department has already released guidance on how the aviation industry and businesses “critical to maintaining national security” can seek payroll grants and operating loans, worth up to $46 billion. These guidelines are instructive as mid-sized and large businesses and nonprofits begin to prepare for their chance at the Treasury window.

CARES Act Planning Opportunities for Retirement Accounts and Charitable Giving

The “Coronavirus Aid, Relief, and Economic Security Act” (CARES Act) was signed into law on March 27, 2020. Included in the $2.2 trillion dollar stimulus package are provisions changing the rules for retirement plans. Other provisions encourage charitable giving by allowing taxpayers to deduct up to 100 percent of their adjusted gross income for cash contributions to qualified charities. These changes present unique planning opportunities which can result in substantial tax savings. Discussed below are some of these opportunities.

Alabama Issues Statewide Stay-at-Home Order

Following declarations of emergency and actions in the counties surrounding Birmingham, the Alabama State Health Officer determined that further social distancing measures are necessary on a statewide basis to prevent the spread of COVID-19. On April 3, 2020, Dr. Scott Harris amended prior orders (which had suspended certain public gatherings statewide) to direct its residents to shelter in place.

Texas Environmental Compliance During the COVID-19 Pandemic

The swift onslaught of the COVID-19 virus has presented serious challenges to the regulated community’s ability to maintain standard compliance protocols. Environmental agencies, which are also struggling with workforce impacts of their own, are responding with updated compliance and enforcement policies meant to provide some measure of relief, without relaxing substantive obligations.

Zone of Uncertainty: Director Considerations in Responding to COVID-19

Boards of directors face the challenging task of managing the impact of the COVID-19 pandemic on the business, be it from reduced demand, supply chain or operational interruptions, employee issues, or liquidity constraints.

COVID-19: Tennessee Becomes Latest State to Issue Stay-Home Order

In response to the outbreak of COVID-19, Tennessee Governor Bill Lee issued a stay-home order on Thursday evening. The order amends earlier executive orders that had enacted less strict restrictions on travel in Tennessee.

NRC Takes Important Step Toward Following White Paper Recommendations for Streamlining NEPA Reviews for Advanced Nuclear Reactors

Background
The National Environmental Policy Act (NEPA) requires federal agencies proposing to undertake, approve or fund “major Federal actions” to evaluate the action’s environmental impacts, including both direct and reasonably foreseeable indirect effects. NEPA also requires agencies to consider alternatives to the proposed action and to discuss cumulative impacts resulting from the incremental effects of the project when added to those of other past, present, and reasonably foreseeable future projects.

Governor DeSantis issues “Safer at Home” Order until April 30, 2020

On April 1, 2020, Governor Ron DeSantis mandated the closure of all nonessential businesses by Executive Order 20-91, effective April 3, 2020, at 12:01 am and expiring on April 30, 2020, unless extended by subsequent order. The order also requires anyone in Florida to limit their movement and personal interactions outside of the home to “essential services” and “essential activities.” The Order also mandates that senior citizens and Floridians with significant underlying medical conditions (chronic lung disease, moderate to severe asthma, serious heart conditions, immunocompromised status, cancer, diabetes, severe obesity, renal failure, and liver disease) “shall stay at home and take all measures to limit the risk of exposure to COVID-19.”

Health Care Providers Should Prepare for $100 Billion Reimbursement

The Coronavirus Aid, Relief, and Economic Security (CARES) Act appropriates an additional $100 billion to the “Public Health and Social Services Emergency Fund” to reimburse “eligible health care providers” for COVID-19 related health care expenses or lost revenues. The Act gives the Secretary of Health and Human Services (HHS) broad discretion in distributing these funds as efficiently as possible. The Secretary has yet to publish guidance as to how funds will be administered, so we will be following developments closely as they occur. Below are the key concepts for those interested in pursuing these funds.

Virginia Ordered to Stay at Home Until June 10th

In response to the rise in COVID-19 cases both nationwide and in the Washington, DC, region, Virginia Governor Ralph Northam issued a statewide order for residents to stay at home except in very limited circumstances. Executive Order No. 55 is effective immediately and remains in place until June 10, 2020, unless amended or rescinded by another executive order.

Closing the Capitol: Mayor Bowser Issues Stay-at-Home Order

Following a growing list of states and municipalities, on March 30, 2020, Washington, DC, Mayor Muriel Bowser issued an order to all individuals living in Washington, DC, to stay at home except to perform “essential activities.” Order 2020-54 is effective from 12:01 am on April 1, 2020, until April 24, 2020, unless extended, rescinded, superseded or amended by a subsequent order.

California Eases Strict Statutory Compliance in Face of COVID-19

Governor Newsom issued an Executive Order this weeks that augments the existing California stay-at-home order, EO N-33-20, to provide administrative relief to governmental agencies as well as the business sector whose compliance with certain laws and regulations is likely to be adversely impacted by COVID-19.

COVID-19 Relief: What Funds, Corporate Investors and Their Portfolio Companies Should Know About Eligibility for the Payroll Protection Program Under the CARES Act

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), passed on March 27, 2020, sets aside $349 billion for Paycheck Protection Loans, which are available through banks, credit unions and other lenders (and guaranteed by the Government) and allows for forgiveness of certain amounts. The authority to make and approve loans under the programs is to be delegated by the SBA to participating lenders. (We summarized the Act’s small business loan provisions here.) Loans under the Paycheck Protection Program are available through June 30, 2020, and expanded Economic Injury Disaster Loans are available through December 31, 2020.

COVID-19 Impacts on REITs and Mitigation Strategies

Investing Debt Proceeds
With the sudden shutdown of REIT business tenants from COVID-19 and the potential impact on REIT landlords, REITs have sought large infusions of cash for liquidity. A REIT borrowing a large amount of cash may want to invest that cash in short-term income-producing investments. However, the REIT must be conscious of the quarterly REIT asset tests if it intends to place borrowed cash in anything other than bank demand deposit accounts. The 75% asset test under federal income tax law (the Code) generally requires that, as of the close of each quarter of the taxable year, at least 75% of the value of the REIT’s assets must consist of real estate assets, cash, cash items (including receivables), and U.S. government issued or guaranteed securities (collectively, “good” assets). Other financial instruments are generally treated as “securities” and would not be treated as “good” assets for this 75% asset test, and a REIT’s holdings in such assets are limited under several other asset tests.

Registration and Compliance Obligations are Reality for Private Funds in the Cayman Islands

For many years regulators and other government officials in the Cayman Islands have worked closely with tax and regulatory authorities and others in non-Cayman jurisdictions to minimize the risk that bad actors would use Cayman jurisdictional means to evade taxes, launder money or engage in other illegal conduct. The Cayman Islands Government has incurred great expense to establish, implement or improve systems designed to facilitate international law enforcement and crime prevention. As a result of those and other important efforts by the Cayman Islands Government, reforms in the Cayman Islands have been among the most significant of any nation.

So the Government Shut Down Your Construction Project—What Next?

Last Friday, New York issued updated guidance that halted all construction in the state, except for “essential construction” which consists of roads, bridges, transit facilities, utilities, hospitals or health care facilities, affordable housing, and homeless shelters. As a result, most commercial construction and condominium projects are now on hold, with the exception of work that must be completed for safety purposes and emergency work. The New York guidance is a drastic departure from the state’s previous guidance, which generally exempted construction as an essential service. The Empire State Development’s website provides further detail as to what constitutes essential health care operations and infrastructure.

Mitigation of Investment Adviser Business Interruption and Regulatory Non-Compliance Risks Related to COVID-19

We recommend the following specific measures to mitigate risks of business interruption and regulatory noncompliance resulting from the COVID-19 pandemic.

COVID-19: Due Diligence Considerations for Underwriters in Securities Offerings

In the wake of COVID-19, underwriters should be vigilant when conducting due diligence on an issuer intending to engage in a securities offering. The issuer could be facing work-stoppages, supply-chain disruptions, reduced demand for products and services, securities portfolio devaluations, impairments, or a host of other concerning developments, any of which could be material to the issuer’s business, financial condition or results of operations. Underwriters should seek to understand all material impacts of COVID-19 on the issuer to ensure that such matters have been properly disclosed to investors prior to any underwritten offering. These matters can be explored, among other ways, in due diligence sessions with the issuer’s management.