Paycheck Protection Program Loans: Avoiding Liability and Implementing Compliance Best Practices
Many public companies and private companies with venture capital and private equity investors have received paycheck protection loans (or are applying for them) in compliance with the statutory requirements of the CARES Act. However, recent nonbinding guidance from Small Business Administration, together with extensive media coverage, indicate that the government will scrutinize the eligibility of public and venture-backed private companies. The Secretary of the Treasury has also stated that the government will scrutinize the eligibility of public and venture- and PE-backed private companies. The Secretary of the Treasury has also stated that the government will audit all paycheck protection loans in excess of $2 million. A company's certification as to its need for the loan under these shifting standards presents risks of a government investigation, whistleblower complaints (including from terminated employees), negative publicity and diligence issues with respect to a future sale of the business or IPO.
Foley Hoag's business and white collar lawyers will discuss what boards of directors should do in light of these fast-evolving circumstances. We will address factors a company should consider to determine whether the need for the funds justifies an application, whether to withdraw an already filed application, whether to consider returning funds already received under the program and how to develop a compliance program once the loan is received.