July 11, 2020

Volume X, Number 193

July 10, 2020

Subscribe to Latest Legal News and Analysis

July 09, 2020

Subscribe to Latest Legal News and Analysis

July 08, 2020

Subscribe to Latest Legal News and Analysis

Paycheck Protection Program Flexibility Act

On June 3, 2020 Congress passed the Paycheck Protection Program Flexibility Act (the “Flexibility Act”). Below are some of the highlights from the Flexibility Act:

  • Extending the Paycheck Protection Program (PPP) until December 31, 2020;

  • The extension includes extending the safe harbor for borrowers to rehire employees or reverse salary reductions from June 30, 2020 to December 31, 2020. The amount of forgiveness a borrower can receive will not be affected by a reduction in employees if the borrower can document:

    • an inability to rehire individuals who were employees of the borrower on February 15, 2020; and

    • an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or

    • borrower is able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19;

  • The “covered period” for loan forgiveness is extended from eight-weeks following the disbursement of the loan to the earlier of 24 weeks from loan disbursement or December 31, 2020. Any borrower who received a loan before the enactment of the Flexibility Act can elect to continue using the eight-week covered period;

  • The Flexibility Act reduces the 75/25 rule for use of loan proceeds. Borrowers are now allowed to use 60% of the loan for payroll costs and 40% for eligible nonpayroll costs;

  • The six-month deferral of payments due under PPP loans will be eliminated and replaced with loan deferral until the date on which the amount of loan forgiveness is remitted to the lender. If a borrower fails to apply for loan forgiveness within ten-months after the last day of the covered period for PPP loan forgiveness, the borrower must begin to make payments of principal, interest, and fees on its PPP loan;

  • Eligibility for a PPP loan will remain the same; expanding eligibility to nonprofits other than 501(c)(3) organizations was not included in this legislation;

  • Loan maturity is extended to five years and applies to PPP loans made on or after the enactment of the Flexibility Act. However, lenders and borrowers are not be prohibited from mutually agreeing to modify the maturity terms of prior-disbursed PPP loans; and

  • Lastly, the Flexibility Act removes the provision restricting employers who receive PPP loan forgiveness from deferring payroll taxes incurred between March 27, 2020 and December 31, 2020.

COPYRIGHT © 2020, STARK & STARKNational Law Review, Volume X, Number 156

TRENDING LEGAL ANALYSIS


About this Author

Eric Z. Stevenson Business & Corporate Attorney Stark & Stark Lawrenceville, NJ
Associate

Eric Z. Stevenson is an Associate and a member of Stark & Stark’s Business & Corporate Practice Group. Mr. Stevenson concentrates his practice in the representation of start-up companies, investment companies, and non-profit organizations on a variety of issues, including corporate formation, financing, franchising, licensing, acquisitions, executive compensation, equity compensation plans, employment agreements, real estate, governance, and intellectual property law.

Prior to joining Stark & Stark, Mr. Stevenson served as a Judicial Law Clerk to the Honorable L. Grace...

609.219.7404
Rachel Lilienthal Stark Banking & Financial Services Attorney Stark & Stark Lawrenceville, NJ
Shareholder

Rachel Lilienthal Stark is a Shareholder and member of the Banking & Financial Services, Business & Corporate, Intellectual Property and Non-Profit Organization Groups. Ms. Stark concentrates her practice in the representation of start-up and emerging companies and non-profit organizations on a variety of issues including corporate formation, financing, franchising, licensing, acquisitions, executive compensation, equity compensation plans, employment agreements, real estate and intellectual property law. Ms. Stark also represents lenders in commercial loan transactions.

Before joining Stark & Stark, Ms. Stark worked as an associate for the New York City law firm of Cahill Gordon & Reindel. She also served as a summer intern for The Honorable Anne E. Thompson, Chief Judge of the United States District Court, District of New Jersey and as a staff assistant to Senator Frank R. Lautenberg in Washington, D.C.

Ms. Stark is a frequent guest lecturer on business law, family business and succession planning at Rider University’s Business School. She also serves on the Board of Directors of the Real Estate Section of the Mercer County Bar Association, on the Executive Advisory Council of Rider University’s College of Business Administration, and is the Co-Chair of the Lawrence Chapter of the MIDJersey Chamber of Commerce.

609.895.7348
Dolores Kelley, Stark and Stark Law, Real Estate Lawyer, Zoning and Land Use Attorney, FDA Litigator
Shareholder

Dolores R. Kelley is a Shareholder and member of Stark & Stark’s Business & Corporate, Real Estate, Zoning & Land Use and Beer & Spirits Groups, where she concentrates her practice in the representation of start-up and emerging companies, breweries, distilleries, and non-profit organizations on a variety of issues including corporate formation, financing, licensing, acquisitions employment agreements and intellectual property law. Dolores also handles a wide range of matters for the real estate industry, including commercial transactions, leasing, condominium and homeowner...

609.791.7005