November 28, 2020

Volume X, Number 333

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New Guidance: SBA Clarifies That Foreign Employees Must Be Counted for PPP

The Small Business Administration has clarified through newly-issued guidance that employees of foreign affiliates must be counted when determining the size of a business for eligibility under the Paycheck Protection Program. This new guidance, which is part of a steady stream of recent updates to the PPP rules, puts to rest some debate as to whether the SBA’s prior rules and guidance could be interpreted to permit the exclusion of foreign employees from the calculation.

As described in prior alerts, PPP loan eligibility generally requires that a business have 500 or fewer employees, with some exceptions based on the SBA’s alternative size standards for certain industries, as well as different rules for restaurants and hotels. In determining the number of employees, the PPP rules require that the employees of all affiliated entities – whether such affiliation arises by virtue of common ownership or control – be counted together when determining an entity’s size. Today’s guidance confirms that “an applicant must count all of its employees and the employees of U.S. and foreign affiliates, absent a waiver of or an exception to the affiliation rules.”

This guidance follows a series of new or updated rules and guidance recently issued by the SBA that, among other things:

  • Extends the “safe harbor” related to the PPP’s necessity certification until May 14, 2020 (FAQ 43);

  • Treats nonprofit hospitals exempt from taxation under section 115 of the Internal Revenue Code as meeting the definition of “nonprofit organization” under section 1102 of the CARES Act, so long as the hospital determines, in writing, that it is an organization described in section 501(c)(3) of the Internal Revenue Code (FAQ 42);

  • Modifies a rule related to loan forgiveness to provide that where a borrower offers to rehire an employee, but the employee declines the offer, the loan forgiveness amount will not be reduced based on that employee reduction (FAQ 40);

  • Clarifies through a supplemental Interim Final Rule that a corporate group, defined as businesses majority owned by a common parent, shall not receive more than an aggregate of $20 million of PPP loans; and that

  • If a business had a change in ownership after February 15, 2020 it could still be eligible for a PPP loan, despite the CARES Act’s provision that PPP loans are available only to business in operation on February 15, 2020 (FAQ 38).

© 2020 Bracewell LLPNational Law Review, Volume X, Number 128
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David Shargel, commercial litigation, white collar criminal defense attorney, Bracewell Law firm
Partner

David Shargel is a senior counsel in the trial section of Bracewell's New York office. His litigation practice focuses general commercial litigation, internal investigations and white collar criminal defense. Mr. Shargel's practice also involves issues surrounding electronic discovery and data management.

Mr. Shargel has litigated complex commercial disputes involving contract, business torts, insurance coverage, technology and fraud, and has litigated disputes concerning federal and state constitutional law, including the Commerce and Due...

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David Ball, Intellectual Property Attorney, Bracewell Giuliani, law firm
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David J. Ball is a partner in Bracewell's litigation practice. David has experience in the areas of intellectual property litigation (patent, copyright, trademark, trade dress, and IP theft), bankruptcy litigation, and state and federal appeals.  He also regularly represents financial services firms (international banks, regional banks, hedge funds, etc.) in complex commercial disputes.  David routinely draws on his litigation experience to counsel clients in all manner of business transactions, including risk analysis, contract formation, mergers and acquisitions, and...

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Rachel goldman, complex commercial litigation, attorney, Bracewell law
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Rachel Goldman is an experienced litigator in both federal and state courts, at the trial and appellate levels. Her practice focuses on complex commercial matters, including claims for breach of contract, post-acquisition disputes, class actions, False Claims Act cases, insurance coverage disputes, contested bankruptcy matters, challenges under the Commerce Clause and the Supremacy Clause, government regulation, securities litigation, construction law, First Amendment and libel actions. Additionally, Rachel's tenure as in-house counsel provides a valuable perspective of...

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Jonathon Hance Energy Intellectual Property Attorney Bracewell Law firm
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Mr. Hance focuses his practice on energy and intellectual property litigation, with an emphasis on complex commercial disputes relating to energy-supply agreements, and particularly, ISDA Master Agreements, in the oil & gas, liquefied natural gas (LNG), trading & marketing, renewable, solar, chemical, and petrochemical industries. His litigation practice also includes cases of patent infringement, trademark infringement, false-marking, and misappropriation of trade secrets in the areas of software, open-source code, mobile devices, computer hardware, gTLDs (...

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Josh Zive, Legislative Regulatory Advocacy attorney, Bracewell law firm
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Josh Zive is a senior principal at Bracewell with an eclectic background in legislative and regulatory advocacy, campaign finance and ethics laws, strategic communications and issues related to international trade and economic sanctions. He works closely with associations and companies involved in legal and political controversies to craft and deliver arguments that can be successful with legal, political and public audiences. No matter the forum or the specific controversy, Josh strives to serve as trusted counsel for his clients and to provide timely and practical...

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