Public Contractors
Beware
By:
James S. Simon
and
Donald B. Leach, Jr.
At the end of 2006, the Ohio General Assembly passed H.B.
694, a sweeping reform of Ohio’s campaign finance laws
that affects all public contractors. This new law
severely constrains public contractors’ ability to make
political contributions to officeholders that award
bid or unbid public contracts valued over $500.
Affected public contracts include those let by the
state, state agencies and political subdivisions,
including local governments and appointed boards,
agencies and commissions. H.B. 694 imposes harsh
sanctions, including criminal prosecution and contract
rescission, on contractors that violate its limits.
The provisions of H.B. 694 affect all contributions made
after January 1, 2007. Under the new law an
officeholder (and all boards, agencies or commissions
the officeholder appoints) cannot award a public
contract to a contractor if the officeholder received
campaign contributions exceeding $1,000 during the
preceding two years from an individual owner, member,
partner, 20% shareholder or professional corporation
shareholder of a public contractor. The limit includes
contributions by owners’ spouses and minor children.
Further, an officeholder (and all boards, agencies or
commissions the officeholder appoints) cannot award a
public contract to a contractor if the officeholder
received campaign contributions exceeding $2,000 during
the preceding two years from all of a public
contractor’s partners, members, 20% shareholders (of a
general corporation), or professional corporation
shareholders (including owners’ spouses and minor
children), and any “affiliated PAC.”
The burden of proving compliance with H.B. 694 rests on
the contractor. Before being awarded a public contract,
the contractor must certify compliance with H.B. 694.
False certifications are punishable as fifth-degree
felonies. These same limits apply from the award of a
contract until one year after its completion. Further
contributions over the limits after the award of a
contract can result in fines and rescission of the
contract.
Under H.B. 694, seemingly nominal support of an
officeholder from a public contractor or its owners can
disqualify the contractor from receiving public
contracts or may result in the loss of already-awarded
contracts. Therefore, it is important for every public
contractor to closely monitor the political
contributions it makes and the contributions made by its
owners and any affiliated PAC.
Jim Simon
is an Associate in the
Business Law
Practice Group.
He can be reached at
jsimon@bdblaw.com
or
330.643.0268.
Don Leach
is a Shareholder in the
Real Estate & Construction Law
Practice Group.
He can be reached at
dleach@bdblaw.com
or
614.227.4262.
By:
Gerald B. Chattman
The Ohio Department of Health announced that enforcement
of the statewide, voter-approved smoking ban begins
effective May 3, 2007. Local health departments will be
responsible for enforcing these rules. Although the law
officially took effect in December, the Health
Department could not cite businesses for violations
until the proposed rules were approved by the state
legislature. The final rules, as approved in April,
prohibit smoking in most public places including
restaurants, bars and places of employment. Exceptions
may apply to certain private clubs, outdoor
patios, designated hotel rooms, tobacco shops, enclosed
areas of nursing homes, and some vehicles used for
business purposes. For example, a private club is
exempt from the law only if it meets all of the
following criteria:
-
The club
operates as a non-profit entity.
-
The club
is located in a freestanding building occupied
solely by the club.
-
Only club
members are present. (Note – the ban will apply at
times the club opens its events to the public.)
-
No one
under the age of 18 is present.
-
If the
club serves alcohol, it possesses a valid D-4 liquor
license.
Beginning May 3, business owners and employers who
disregard the law face a progressive series of penalties
ranging from an initial warning letter to fines up to
$2,500 for subsequent violations. To comply with the
law, business owners must prohibit smoking in enclosed
areas directly or indirectly under their control in
addition to points of entry and exit into their
buildings. Business owners are also required to post
no-smoking signs and remove all ashtrays from their
premises.
Please contact the members of the BDB Business or
Nonprofit Practice Group with any questions regarding
compliance with Ohio’s smoking ban.
Gerald Chattman
is a Shareholder in the
Business Law Practice Group.
He can be contacted at
gchattman@bdblaw.com
or
216.615.7354.
Corporate Law...
By:
James S. Simon
Is it Enforceable? Incorporating Internet
Terms and Conditions into a Customer Agreement
We have all signed agreements that are “subject to”
terms and conditions housed on a web page. Are these
terms really enforceable? In a recent Florida case, the
plaintiff attempted to enforce an arbitration provision
in a contract “subject to” the terms and conditions on a
web page. Florida’s Fourth District Court of Appeals
upheld a lower court’s decision that the arbitration
provision was unenforceable because it was not
“incorporated.” To protect your business:
1. State that the terms of any separate document
or web page are “fully incorporated into” the customer
service agreement.
2. Provide a hard copy of any separate documents
or web page.
3. If the Internet address must change, notify
your customers.
Have the agreements reviewed by corporate counsel.
Employee Benefits Law...
By:
Lisa M. deFilippis, Employee Benefits Group
Chair
IRS Executive Compensation Final Regulations
Issued
The IRS has issued final regulations on Section 409A of
the Internal Revenue Code, which governs nonqualified
deferred compensation arrangements for executives of
for-profit companies and nonprofit organizations. The
final regulations generally follow the proposed
regulations issued in September 2005 but also provide
additional guidance. Section 409A is generally
effective for amounts deferred on or after January 1,
2005, and for amounts deferred prior to that date but
not fully vested. Arrangements subject to Section 409A
must be in good faith compliance in operation from
January 1, 2005 through December 31, 2007. Nonqualified
deferred compensation arrangements must be amended by
December 31, 2007, to bring them into compliance with
Section 409A; therefore, existing arrangements must be
reviewed, and any necessary amendments made no later
than December 31, 2007.
Environmental Law...
By:
William L. Caplan, Environmental Group Chair and
David J. Hrina
Environmental
Factors Impact Business Conduct
Today’s environmental issues are no longer of concern
just to manufacturers. Continuing legislative efforts to
increase business responsibility in this area make it
essential that lenders, fiduciaries, real estate
professionals, service and sales entities, mining
companies, schools, hospitals, oil and gas operators, as
well as insurers, carefully consider environmental
factors and their impact upon business conduct.
Finance & Public
Law...
By:
Rana M. Gorzeck
Capital Expenditures on IDB Financing Now Doubled
to $20 Million
As of January 1, 2007, under new regulations passed by
the Economic Development Agency, manufacturers and
non-profit organizations can increase the size of
projects financed through industrial development bonds
to $20 million. While the cap on the use of tax-exempt
bond financing remains at $10 million, the total
expenditure on an IDB-financed project has increased
from $10 million to $20 million over a six-year period.
The increase is intended to spur economic development,
create jobs and expand local economies. By permitting
larger IDB projects, the new regulations have become
less restrictive. In addition, with the use of IDB
financing, the interest rate savings can be as high as
3% annually.
International Business
Law...
By:
Frank Schuckmann, International Business Law
Group
Chair
Non-Competition Provisions for German Sales
Representatives
U.S. manufacturers who retain the services of a sales
representative in Germany should be aware of some
pitfalls in German law related to post-termination
non-competition clauses. Germany statutorily limits the
length (two years) and scope (by appropriate territory
or customer) of non-competition clauses. In addition,
unlike the U.S. approach, Germany requires that the
representative be paid appropriate compensation during
the non-competition term. The Company may terminate the
non-competition provision only if it gives written
notice six months prior to the termination, unless the
representative was terminated for good cause, in which
case a one-month notice is sufficient. These provisions
cannot be contractually modified in a manner that would
be less advantageous to the representative.
Mergers &
Acquisitions...
By:
Steven A. Armatas
Minimizing the Risks of an Asset Purchase
Generally, purchasers of a business buy only the assets
of the seller to avoid unwanted liabilities such as
pending lawsuits. However, structuring your deal as an
“asset purchase” is not always sufficient to accomplish
this objective. Some states now recognize what is called
the “mere continuation doctrine,” under which a
purchaser of assets can still be forced to assume the
liabilities of the selling entity. Other jurisdictions
impose obligations to cover unpaid taxes under certain
circumstances. Adding various provisions to your
contract, such as holding back a portion of the purchase
price, placing funds in escrow or providing for
indemnification, can all help in minimizing these risks.
Contact a member of our M&A Group for more information.
Nonprofit Law...
By:
Gerald B. Chattman,
Nonprofit Group Chair
Alternative Revenue Streams
More and more nonprofits searching for additional or
alternative revenue streams are turning to the formation
of for-profit, stand alone or subsidiary corporations.
This can present a number of challenges in terms of
formation, governance and tax considerations. However,
with careful planning all obstacles are surmountable and
the potential reward well worth the investment.
Securities Law...
By:
Jay Ballard
Proposal for Streamlined Capital Reporting
In May, the Securities and Exchange Commission issued a
proposal to streamline capital raising and reporting
requirements for small public companies, including:
- A new
system that would make scaled securities regulation
available to many more companies;
-
Modified eligibility requirements so companies with
a public float below $75 million can take advantage
of shelf registration;
- A new
exemption from Securities Act registration
requirements for sales of securities to a newly
defined category of “qualified purchasers” in which
limited advertising would be permitted;
-
Shortened holding periods under Securities Act Rule
144 for restricted securities to reduce the cost of
capital and to increase access to capital;
- New
exemptions for compensatory employee stock options
so registration requirements would not be triggered
solely by a company’s compensation decisions; and
-
Electronic filing
Tax Law...
By:
David J. Lewis, Taxation Group Chair
Conservancy Easement Deduction
Internal Revenue
Code §170(h) provides tax incentives for
conservancy easements on farmlands or wooded lots, even
while the landowner still enjoys use of the land. A
qualifying conservancy easement, if granted by a
landowner, would restrict, on an agreed-upon basis, the
development of the land. The landowner could then
deduct the value of the conservancy easement for federal
income tax purposes, subject to certain limitations. By
doing so, the landowner can preserve the land for future
generations even while retaining the ability to use it,
subject to those restrictions.
