EPA Delays PFAS Reporting Deadlines, Again: Implications for Manufacturers and Importers
On May 12, 2025, the U.S. Environmental Protection Agency (EPA) announced an amendment delaying the data submission period for the Toxic Substances Control Act (TSCA) PFAS reporting rule, which will now begin on April 13, 2026, and end on October 13, 2026. Small manufacturers who report solely as article importers will have until April 13, 2027, to complete their submissions. The EPA stated that this delay is necessary to allow additional time for the development of the reporting software. While no other changes are currently planned, the agency is considering reopening certain aspects of the rule for public comment to accommodate potential modifications before the new deadlines.
The interim final rule, published in the Federal Register on May 13, 2025, became effective immediately but remains open for public comment for 30 days. This is the second delay in the reporting timeline. The original requirement was established in September 2023, mandating manufacturers and importers of PFAS from 2011 to 2022 to submit reports. Initially, the reporting period was scheduled to begin on July 11, 2025, but was postponed to accommodate ongoing preparations.
The initial rule aimed to impose reporting and recordkeeping requirements on entities involved in the manufacture or import of PFAS, including those in “articles,” as that term is defined by TSCA, for the years between 2011 and 2022. The EPA explained that delays are primarily due to the need for more time to develop necessary data collection tools and that the agency is considering future rule modifications influenced by efforts to deregulate, such as Executive Order 14219. The agency is also responding to petitions from chemical companies seeking to narrow the scope of the current rule and obtain exemptions consistent with standard TSCA 8(a) reporting provisions.
The One Big Beautiful Bill: Relevant Provisions for Nonprofits
On May 12, 2025, the House Ways and Committee released an updated text of draft tax legislation (the “House Draft Bill”). Amongst the proposed provisions are a few significant changes that could particularly affect nonprofits and individuals working with or for nonprofits:
Nonprofits would be required to pay tax on the sale or license of any name or logo of the organization (generally at the corporate rate of 21%). Under current law, nonprofits do not ordinarily pay tax on royalties from an unrelated payor—the House Draft Bill would specifically identify gain and royalty income from the name or logo as “unrelated business taxable income.” This provision could have a material impact on sports-related tax exempts and private universities that license their name or logo in connection with collegiate sports activities.
For private colleges and universities, the current excise tax on net investment income (generally taxed at 1.4%) would be replaced with a multiple-tier tax on net investment income based on the college’s or university’s “student-adjustment endowment”. The tax rate scales up to 21% for a sufficiently large endowment. Additionally, for such colleges and universities, the definition of net investment income would be expanded (to include, for instance, interest on student loans and “Federally-subsidized royalty income”). The provision grants the Treasury with specific authority to prescribe regulations or other guidance, as necessary, to prevent the avoidance of this excise tax.
For private foundations, the current 1.39% tax rate would be replaced by a tiered tax on net investment income based on the total gross value of the assets held by the foundation—the top rates reaching 10%.
Nonprofits (other than “churches” or certain “church-affiliated organizations”) would have to pay tax (generally at the corporate rate of 21%) on parking facilities and transportation fringe benefits. The Tax Cuts and Jobs Act of 2017 had originally included similar provisions imposing taxes on such facilities and benefits, but these provisions had been retroactively repealed in 2019.
The excise tax imposed on significant compensation paid to the 5 highest-compensated employees of an applicable tax-exempt organization would be expanded to all employees of the organization or any related person or governmental entity.
A 1% floor would be added for charitable contribution deductions made by corporations.
All of these provisions would generally come into effect after 2025. It is, of course, possible that the above changes will not be included in the final tax legislation, or that material modifications could be made to such provisions before they are voted upon. The Ways and Means Committee held its markup session on May 13, 2025, and it voted to advance the House Draft Bill to the House floor. The full panoply of further legislative steps (such as Senate consideration, and any reconciliation between Senate and House versions) are to come, although Congressional leadership has stated that the goal is to finalize the legislation by July 4, 2025.
Think Compliance Got Easier? Think Again—DOJ’s New Era in White-Collar Enforcement (Part 2)
As discussed in our May 15th post, Matthew R. Galeotti, the Head of the Department of Justice’s (“Department”) Criminal Division, issued a memorandum on May 12th that highlights the core tenets of the Department’s enforcement of corporate and white-collar matters under the Trump Administration—focus, fairness, and efficiency. Whereas our first post discussed the focus tenet, this second post in our series delves into the Department’s “fairness” tenet. Under the fairness prong, Galeotti underscores that “justice demands the equal and fair application of criminal laws to individuals and corporations who commit crimes.”
For several years, the Department has expressed an emphasis on individual liability. The Galeotti Memorandum explains that a central component of fairness is to “prosecute individual criminals,” focusing on executives, officers, and employees who are directly responsible for wrongdoing. Galeotti further notes that the majority of American businesses are legitimate, and that enforcement overreach can “punish risk-taking and hinder innovation.”
The Galeotti Memorandum cautions that “not all corporate misconduct warrants federal criminal prosecution.” Instead, civil and administrative remedies are often satisfactory for low-level misconduct. Also, Galeotti instructs prosecutors to ensure their charging decisions take into consideration factors such as whether companies self-report misconduct, cooperate with prosecutors, and engage in remediation.
Transparency is another cornerstone of the fairness directive. The Department is committed to making the terms of corporate resolutions—paths to declination, fine reductions, and relevant factors for resolution—”more easily understandable.” As explained by our colleagues last week, the revised Corporate Enforcement and Voluntary Self-Disclosure Policy contemplates benefits for companies that self-disclose, including potentially shorter oversight terms and early termination of agreements.
In addition, the Department is actively reviewing existing agreements between companies and the Department to determine if early termination is warranted. This determination will be based on factors such as:
the “duration of the post-resolution period,”
a “substantial reduction in the company’s risk profile,”
the company’s remediation efforts, and
the “maturity of” the company’s compliance program.
For companies that have cooperated with the government and remediated the misconduct at issue, the Galeotti Memorandum states that the terms for corporate resolutions will not exceed three years except in rare circumstances. These resolutions will also be regularly reassessed to ensure they remain appropriate.
We will delve into the final prong of the Galeotti Memorandum—efficiency—in our next post.
SEC Staff Issues Additional FAQs on Crypto Asset Activities
On May 15, 2025, the staff of the SEC’s Division of Trading and Markets issued new FAQs relating to crypto asset activities and distributed ledger technology. Additionally, the staffs of the Division of Trading and Markets and the Office of General Counsel of FINRA also withdrew their 2019 joint statement regarding broker-dealer custody of digital asset securities.
The new FAQs outline how SEC-registered broker-dealers can comply with the net capital and custody rules under SEC Rules 15c3-1 and 15c3-3, respectively, drawing a distinction between crypto assets that qualify as securities and those that do not. Key takeaways include:
Rule 15c3-3(b) on physical possession or control applies only to securities, not non-security crypto assets.
Broker-dealers may establish control over digital asset securities by complying with Rule 15c3-3(c), even if those assets are not in certificated form.
The SEC staff’s 2020 statement on custody of digital asset securities by special-purpose broker-dealers is not mandatory but instead offered a temporary safe harbor, and broker-dealers may also rely on control procedures under Rule 15c3-3(c).
For crypto exchange-traded products, in-kind creation and redemption is permitted, though proprietary positions in Bitcoin and Ether are potentially subject to haircuts under the net capital rule, Rule 15c3-1.
Only crypto securities registered with the SEC are protected under the Securities Investor Protection Act. Thus, non-security crypto assets, even if held at a SIPC-member broker-dealer, do not receive SIPC protection.
Transfer agents may use distributed ledge technology as an official “master securityholder file” under SEC Rule 17Ad-9(b).
Commissioner Peirce also issued a statement in support of the FAQS, noting that “these FAQs are incremental, not comprehensive” and that the SEC “staff and the Commission still have much more work to do.”
Maintenance Obligations on a 30-Year-Old Project Let an Owner Sidestep Tennessee’s Statute of Repose
In Tri-State Insur. Co. of Minn. a/s/o Campus Chalet, Inc. v. East Tennessee Sprinkler Company, Inc., the Court of Appeals of Tennessee recently addressed whether the state’s four-year statute of repose could shield a contractor from liability in 2020 where the initial construction project was completed in 1992. The court found that the trial court improperly granted the contractor a motion to dismiss on its statute of repose defense because the owner’s complaint properly pled breach claims arising out of a separate ongoing maintenance agreement between the parties.
East Tennessee Sprinkler Company, Inc. (ETS) installed a sprinkler system at Campus Chalet in 1992. Campus Chalet also contracted on an ongoing basis with ETS to inspect, repair, and maintain the sprinkler system. A waterline in the sprinkler system burst in 2020, damaging Campus Chalet’s property.
Tri-State Insurance Company of Minnesota, Campus Chalet’s insurer, filed a complaint against ETS. The complaint alleged negligence and breach of contract, specifically claiming that ETS had failed to properly inspect, test, and maintain the sprinkler system since its installation. Tri-State argued that the proximate cause of the sprinkler line burst was improper sloping, a condition that ETS should have identified and corrected through its ongoing maintenance work.
ETS responded by moving to dismiss the case, citing Tennessee’s four-year statute of repose. This statute generally bars claims arising from the design, planning, supervision, observation of construction, or construction of improvements to real property after four years from substantial completion of the improvement. ETS argued that the claims were time-barred because they related to the original installation of the sprinkler system. Tri-State countered that its claims were based on ETS’s continuing obligations to inspect and maintain the system. The trial court sided with ETS, granting the motion to dismiss on the grounds that the claims were time-barred under the statute of repose.
The Court of Appeals of Tennessee reversed the trial court’s decision. The appellate court emphasized that, when reviewing a motion to dismiss, it must construe allegations in the complaint liberally and give the plaintiff the benefit of all reasonable inferences. The appellate court reasoned that a plain reading of the complaint revealed “that the essence of Tri-State’s allegations arise out of ETS’s ongoing maintenance of the system,” which ETS performed “deficiently in years following the sprinkler system’s initial installation.”
The Court of Appeals of Tennessee remanded the case to the trial court for further proceedings. While Tri-State survived the motion to dismiss, that does not necessarily mean it has escaped the statute of repose. If the facts bear out that Tri-State’s claims arose from the initial sprinkler construction contract, ETS may assert the statute of repose defense on a motion for summary judgment or at trial.
A copy of the court’s entire decision can be found here. A video of the arguments on appeal can be found here.
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Major Changes to Expenditure Rate of LIT in SEA 1 (2025)
Indiana Governor Mike Braun signed Senate Enrolled Act 1 (SEA 1) into law last month, introducing a number of changes to the state’s property tax and local income tax system. Most of these changes will take effect July 1, 2027, to enable the new rates to be effective January 1, 2028, subject to certain exceptions. Barnes & Thornburg LLP is closely reviewing the provisions of SEA 1 and will continue to provide additional guidance on how this new legislation affects our municipal clients. This alert summarizes the major changes to local income taxes (LIT) and provides a timeline of those changes:
Summary of Major Changes
Expiration of Existing Expenditure Rate: All expenditure LIT rates imposed in a county under IC 6-3.6-6 expire on December 31, 2027, unless the adopting body (the fiscal body of the county) adopts an ordinance to renew the expenditure tax rate beginning on January 1, 2028. The ordinance renewing the expenditure tax rate must be adopted by October 1, 2027.
Entirely New Structure: The existing structure with component rates and additional revenue being allocated to public safety, economic development and certified shares is being replaced with an entirely new structure with a maximum expenditure rate of 2.9%. More details on the new structure are available below.
Annual Renewal Starting in 2031: Beginning after December 31, 2030, expenditure tax rates expire on December 31 of each year unless renewed by an ordinance of the adopting body by October 1 of each year.
Change in Adopting Body: Local income tax councils are eliminated effective July 1, 2027 and the fiscal body of the county will become the adopting body for the county.
Municipal Tax Rate: Cities and towns with at least 3,500 residents will be able to adopt their own local income tax rate beginning January 1, 2028.
October 1 Deadlines (starting 2027): Adopting bodies must adopt an ordinance by October 1 to adopt, increase, decrease, or rescind a LIT tax, or to grant, increase, decrease, rescind, or change a distribution or allocation. These ordinances take effect on the immediately following January 1. If the ordinances are adopted after October 1, they take effect on the second succeeding January 1 (i.e., an ordinance adopted October 2, 2027, takes effect January 1, 2029); provided, however, ordinances to impose a tax rate under IC 6-3.6-6-2(b)(3) or (4), must be adopted on or before October 1 of a calendar year.
Timeline
Beginning May 10, 2025, through and including July 1, 2027, a unit may not pledge to the payment of bonds, leases or obligations, LIT received under IC 6-3.6 in an amount that exceeds twenty-five percent (25%) of the taxing units certified distribution under IC 6-3.6.
Effective for 2026 and 2027: A county fiscal body may adopt a local income tax to reduce the property tax liability for homesteads (terminates on December 31, 2027)
Effective July 1, 2027:
Following tax rates/allocations repealed:
Allocation of Additional Revenue to Public Safety (IC 6-3.6-6-8)
Allocation of Additional Revenue to Economic Development (IC 6-3.6-6-9)
Allocation of Additional Revenue to Certified Shares (IC 6-3.6-6-10, 11, 12, 14 and 15)
Distribution for Property Tax Relief Credit (IC 6-3.6-6-20)
Local Income Tax Councils are eliminated and the fiscal body of the county becomes the adopting body for all county expenditure tax rates
Effective December 31, 2027: Property tax relief credit expires (IC 6-3.6-5)
Effective January 1, 2028:
Following tax rates/allocations repealed:
PSAP (IC 6-3.6-6-2.5)
Acute Care Hospital (IC 6-3.6-6-2.6)
Correctional Facilities and Rehabilitation Facilities (IC 6-3.6-6-2.7)
Emergency Medical Servies (IC 6-3.6-6-2.8)
Courtroom Costs (IC 6-3.6-6-2.9)
New expenditure rate structure is effective (details below)
After December 31, 2030, the expenditure tax rate expires on December 31 of each year unless the adopting body adopts an ordinance to readopt the tax rate.
New LIT Expenditure Rates (Effective January 1, 2028)
An entirely new LIT structure will be replacing the existing LIT structure with rates effective January 1, 2028. The new rate structure along with the corresponding maximum rate, the adopting body, details of each component are described below.
The total expenditure rate may not exceed 2.9%. The total rates for County Services, Fire Protection and EMS, and Nonmunicipal Civil Taxing Unit may not exceed 1.7%. After December 31, 2030, all expenditure rates expire on December 31 of each year unless renewed by ordinance of the adopting body by October 1 of each year. All population requirements are determined by the most recent federal census.
County Services Rate (IC 6-3.6-6-2(b)(1))
Rate: not to exceed 1.2%
Adopting Body: fiscal body of county
Taxpayer: all individuals residing in the county (including any municipality within the county)
Distribution: retained by county
Uses of Revenue: general purpose revenue for any purpose of the county, including PSAP, economic development, acute care hospitals, correctional facilities and rehabilitation facilities, county judicial staff expenses, and homestead property tax replacement credits (expires on December 31, 2027).
Fire Protection and EMS Rate (IC 6-3.6-6-2(b)(2))
Rate: not to exceed 0.4%
Adopting Body: fiscal body of county
Taxpayer: all individuals residing in the county (including any municipality within the county)
Distribution: revenue shall be distributed by the county to each fire protection district, fire protection territory, and municipal fire department within the county. At the discretion of the fiscal body of the county, the county may distribute this revenue to township fire departments, volunteer fire departments and EMS providers that apply for distribution. The allocation for each provider is determined by a formula based on service population and square miles of service territory for each provider.
Uses of Revenue: fire protection and emergency medical services
Nonmunicipal Civil Taxing Unit Rate (IC 6-3.6-6-2(b)(3))
Rate: not to exceed 0.2%
Adopting Body: fiscal body of county
Taxpayer: all individuals residing in the county (including any municipality within the county)
Types: nonmunicipal civil taxing unit means townships, libraries, and other civil tax units that imposed an ad valorem property tax levy preceding the distribution year and those civil taxing units whose budgets require binding review by another local unit. It does not include counties, cities, towns, schools, or fire protection districts. It does not include a solid waste management district or a joint solid waste management district unless a majority of the members of the county fiscal bodies of the counties within the district adopts a resolution approving the distribution.
Distribution: the fiscal body of the county may adopt a tax rate for each type of nonmunicipal civil taxing unit not to exceed 0.05% per type. Each type is allocated on a pro rata per capita basis. Each nonmunicipal civil taxing unit wanting a distribution must adopt a resolution by July 1 of the year preceding the year of distribution. The county must distribute revenue to each nonmunicipal civil taxing unit that requested distribution. If
One (1) or more, but not all, nonmunicipal civil taxing units request a distribution, then the fiscal body of the county may either distribute the total amount of revenue to (a) only those that requested a distribution or (b) all of the nonmunicipal civil taxing units.
If no nonmunicipal civil taxing unit requests a distribution, then the county may retain the revenue and use it as general purpose revenue.
Uses of Revenue: general purpose revenue
Small Cities and Towns Rate (IC 6-3.6-6-2(b)(4))
Rate: not to exceed 1.2%
Adopting Body: fiscal body of county
Taxpayer: all individuals within the county except for individuals residing in a municipality that is eligible to adopt the municipal tax rate under IC 6-3.6-6-22 (cities and towns with at least 3,500 residents)
Eligible City or Town: means cities or towns
with population less than 3,500; or
with population of at least 3,500, but that have made an election to be treated as a city or town with a population less than 3,500.
Distribution: if the fiscal body of the county imposes a County Services rate of 1.2%, then the fiscal body of the county may elect to retain up to 75% of the revenue under this subsection. Each eligible city or town wanting a distribution must adopt a resolution by July 1 of the year preceding the year of distribution. The revenue not retained by the county must be distributed to each eligible city or town that requested distribution. Revenue is distributed to eligible cities and towns based upon the population of the applicable city or town compared to all of the eligible cities and towns receiving a distribution. If:
One (1) or more, but not all, eligible cities and towns request a distribution, then the fiscal body of the county may either distribute the total amount of revenue to (a) only those that requested a distribution or (b) all of the eligible cities and towns.
If no eligible city or town requests a distribution, then the county may retain the revenue and use it as general purpose revenue.
Uses of Revenue: general purpose revenue for any purpose of the unit, including public safety and economic development
Municipal Tax Rate (Cities and Towns with 3,500 residents or more) (IC 6-3.6-6-22)
Rate: not to exceed 1.2%
Adopting Body: fiscal body of applicable city or town
Taxpayer: all individuals residing in the applicable city or town
Distribution: to the applicable city or town that imposed the tax
Uses of Revenue: general purpose revenue for any purpose of the city or town
Not all LIT changes are included in this summary. There are certain exceptions and rules for Marion County, Hancock County, Grant County, Lake County, Porter County, LaPorte County, and political subdivisions located within such counties. For more information, please contact the Barnes & Thornburg attorney with whom you work.
Spotlight on: Changes to Childcare and Parental Leave
Japan – Amendments to the Childcare and Family Care Leave Act took effect on 1 April 2025, with further amendments to take effect on 1 October 2025.
Singapore – Amendments to the Child Development Co-Savings Act 2001 took effect on 1 April 2025.
Indonesia – Law No. 4 of 2024 regarding Maternal and Child Welfare During the First Thousand Days of Life took effect on 2 July 2024 (Law 4/2024).
Australia – Amendments to the unpaid parental leave (UPL) provisions in the Fair Work Act 2009(Cth) (FW Act) took effect on 1 July 2023.
Japan
Amendments to the Childcare and Family Care Leave Act took effect on 1 April 2025, with further amendments to take effect on 1 October 2025.
Expansion of eligibility for overtime exemption request –Eligible parents can now request an exemption from overtime if they care for children up to elementary school (primary school) age. Previously, this was only available to eligible parents caring for children up to 3 years of age.
Expansion of eligibility for family care leave –Eligible employees who have worked for less than six months are now able to avail themselves of family care leave. Previously, employers can omit such employees by executing a labour-management agreement.
Extension of sick/injured etc. childcare leave – Eligible employees may now utilise this leave for events integral to school life such as starting school ceremony and graduation ceremony. Previously, this was limited to use when a child is sick or injured or requires a vaccination or health check.
Introduction of flexible working options – Employers are now required to offer remote working options to those caring for family members who need continuous care or have a child under 3 years of age.
From October 2025, employers are also required to offer at least two flexible working options to parents with children aged between 3 and 6.
Singapore
Amendments to the Child Development Co-Savings Act 2001 took effect on 1 April 2025.
Replacement of shared parental leave –Eligible working parents are now entitled to six weeks of shared parental leave. Previously, eligible working fathers could only share a portion of the mother’s government-paid maternity leave.
Expansion of government-paid paternity leave –Eligible working fathers are now entitled to four weeks of government-paid paternity leave. Previously, eligible working fathers were only entitled to two weeks of government-paid paternity leave.
Indonesia
Law No. 4 of 2024 regarding Maternal and Child Welfare During the First Thousand Days of Life took effect on 2 July 2024 (Law 4/2024).
Extension of maternity leave – Eligible working mothers may now take up to six months of maternity leave (four months at full pay, two months at 75% pay). This new law augments the position set out in Law No. 13 of 2003 regarding Manpower, as amended (Manpower Law), which provided for paid maternity leave, to be taken 1.5 months prior to giving birth and 1.5 months after giving birth.
Introduction of paternity leave – Eligible working fathers are now entitled to two days of paid paternity leave during delivery and up to an additional three days of paternity after delivery or other period as may be agreed with the employer. Eligible working fathers are also entitled to two days of paid leave in the event of a miscarriage. Previously, the Manpower Law only provided for two days of paid leave for both instances.
Australia
Amendments to the unpaid parental leave (UPL) provisions in the Fair Work Act 2009(Cth) (FW Act) took effect on 1 July 2023.
1. Increased flexible UPL entitlements –As part of their entitlement to up to 24 months of UPL, eligible employees are entitled to the following amounts of flexible UPL:
Flexible UPL Entitlement
Date of Birth or Adoption of Child
100 days
1 July 2023 – 30 June 2024
110 days
1 July 2024 – 30 June 2025
120 days
1 July 2025 – 30 June 2026
130 days
On and from 1 July 2026
Prior to 1 July 2023, eligible employees were entitled to 30 days of UPL. Flexible UPL, which can be used in periods of one day or more at a time, may be taken at any time within 24 months of the birth or adoption of their child.
2. Full UPL entitlement for employee couples –“Employee couples”, being couples where both employees have access to UPL, may access their full UPL entitlement (being 12 months of UPL with the right to request a further period of 12 months), regardless of how much leave their spouse or partner takes. Prior to 1 July 2023, an employee couple could only take a combined period of 24 months of UPL.
3. No limitation to concurrent leave –Employee couples may take UPL concurrently without any limitation. Prior to 1 July 2023, the FW Act imposed certain limitations on employee couples who were taking UPL at the same time (e.g. employee couples could not take more than eight weeks of UPL concurrently).
What Startups Should Know About Early-Stage Equity Term Sheets
If your company is preparing to raise its first round of institutional capital, congratulations. That’s a major milestone. At this stage, it’s critical to ensure that both you and your prospective investors are aligned on the structure and terms of the investment. That’s where a term sheet comes in.
In this comprehensive guide, we’ll explore:
Why the name of the financing round (for example, “seed” vs. “Series A”) matters
Key differences between Seed and Series A financing
What is typically included in an early-stage equity financing term sheet
What founders should look out for when issuing preferred stock
Why the Name of the Round Matters
The name of your financing round is more than a formality, it sets expectations.
Seed Round: suggests your company is in the early stages of development, likely pre-revenue or just beginning to gain traction.
Series A Round: implies more maturity, such as a validated product, growing user base, and early revenue, indicating the company is ready to scale.
Investors often rely on these labels to assess your company’s progress, risk profile, and potential return. Choosing the right naming convention can help manage expectations and align your fundraising strategy with industry norms.
Seed vs. Series A Financing: Key Differences
A seed financing round typically follows friends-and-family or angel investments and represents the first institutional capital. Investors in these rounds may include angel investors, seed-stage venture firms, or angel groups. Key characteristics of a seed round include:
Smaller investment amounts (typically $500,000 to $2 million)
Simpler deal terms
Fewer governance rights and investor protections
Even if a seed round’s structure resembles a Series A, especially if you’re issuing equity rather than SAFEs or convertible notes, founders often prefer to use the “seed” label. Why? It allows the company to reserve the “Series A” designation for a future round, ideally at a higher valuation once the business has matured.
Series A Financing Overview
Series A financing generally follows a successful seed round and is triggered once a company has achieved meaningful traction, such as strong user growth, early revenue, or product-market fit. Series A rounds are typically:
Larger in size ($2 million to $15 million or more)
Led by institutional venture capital firms
Structured with more complex terms, such as:
Board representation
Liquidation preferences
Anti-dilution protections
At this stage, the company is transitioning from startup to scale-up.
What is Included in an Early-Stage Term Sheet?
While the specifics vary depending on investors and company leverage, most early-stage preferred stock term sheets include the following key provisions:
Price Per Share / Pre-Money Valuation
The term sheet will often include either a price per share or a pre-money valuation from which the price per share is calculated. While a higher valuation might seem ideal, it can also mean higher expectations, greater pressure to grow rapidly, and more difficult future funding rounds.
A higher valuation only benefits founders if it’s realistic and paired with founder-friendly terms. It’s essential to evaluate the entire term sheet, not just the headline valuation.
For more on this topic, check out our related advisory: Understanding Pre-Money vs. Post-Money Valuation.
Maximum Offering Amount
This is the total amount of capital the company aims to raise in the round. Along with the valuation, it helps investors calculate the ownership percentage they’ll receive if the round is fully subscribed. The number should balance capital needs, dilution tolerance, and investor interest.
Offering Period
The offering period defines the window in which shares may be sold, ensuring the financing doesn’t remain open indefinitely. This is important because the company’s valuation may change significantly over time.
Liquidation Preferences
In the event of a liquidity event such as a sale, IPO, or liquidation, preferred shareholders typically have two options:
Receive their original investment before common shareholders receive any proceeds; or
Convert their preferred shares to common stock and participate in the distribution on an as-converted basis.
In some cases, investors receive both: their initial investment plus a share in the remaining proceeds (“participating preferred” stock). While this was more common in earlier markets, non-participating preferred has become more standard in later-stage deals or more competitive fundraising environments.
Anti-Dilution Provisions
These provisions protect investors from dilution if the company raises capital in a down round, at a lower valuation than the previous round. Two common structures are:
Weighted Average: More founder-friendly; adjusts the conversion price proportionally.
Full Ratchet: More investor-protective; resets the conversion price to match the new round.
The terms used often reflects the company’s stage and the negotiating power of each party.
Board Representation
Investors often negotiate for the right to appoint one or more members to the company’s board of directors. It’s common for both preferred and common shareholders to appoint directors, with remaining board seats filled by mutual agreement.
Voting Rights
Term sheets typically specify how preferred shares vote, often alongside common shares on a one-vote-per-share basis. In certain cases, preferred holders may vote separately on key issues.
Some term sheets also include protective provisions that require majority approval from preferred shareholders or their board representatives. These provisions give preferred shareholders a type of veto power over certain company actions, such as issuing new equity, selling the company, or amending the certificate of incorporation.
Participation Rights
Preferred investors almost always receive a right of first refusal to purchase their pro-rata share in future fundraising rounds. This helps protect their ownership from dilution.
Other Common Term Sheet Provisions
Additional rights commonly found in term sheets include:
Drag-along and Tag-along Rights – Govern how shareholders participate in company sales
Registration Rights – Important in the context of a future IPO
Dividend Rights – Determine how and when dividends are paid to preferred holders
Conversion Rights – Allow preferred shares to convert to common stock at a preset ratio
A full explanation of these terms is beyond the scope of this guide, but founders should be aware of their presence and potential impact.
Term sheets often include a provision requiring the company to reimburse the lead investor’s legal fees, usually subject to a cap (e.g., $25,000 to $50,000). This is standard practice and should be factored into your fundraising budget.
Final Thoughts for Founders
Term sheets for preferred stock equity financings can vary significantly based on the company’s stage, investor preferences, and market conditions. However, the concepts outlined in this guide represent the core elements that startups are likely to encounter when negotiating early-stage investment deals.
Missouri’s Paid Sick Leave and Portions of the Minimum Wage Increase Repealed
On May 14, 2025, the Missouri Senate passed a bill (HB 567) repealing the paid sick leave requirement along with a portion of the minimum wage increase included in Proposition A, which voters approved on November 5, 2024. Passage required Missouri employers to allow employees to accrue, and use paid sick leave for qualifying reasons on and after May 1, 2025. Likewise, Proposition A provided an increase to the Missouri minimum wage.
While the legal challenges to Proposition A that were filed in the Missouri Supreme Court were not successful, on May 14, 2025, the Missouri Senate accepted and passed House Bill 567, which repealed the entire paid sick leave requirement in Proposition A. The bill also repealed a portion of the minimum wage increase provision in Proposition A, which based future increases to minimum wage on the Consumer Price Index, beginning in 2027. Minimum wage will still increase to $15 per hour in 2026, but there is no longer an increase set to take effect in 2027 and beyond.
The bill repealing the Missouri Paid Sick Leave provisions will now go to Governor Kehoe for signature, who has expressed support for the bill. Because HB 567 does not contain an emergency clause, the repeal will not become effective until August 28, 2025. In the interim, the paid sick leave provisions under Missouri law remain in force and effect. This means employers must continue to provide paid sick leave benefits in accordance with Proposition A’s requirements through August 28, 2025. This is particularly important given the individual right to file a lawsuit seeking legal and injunctive relief and to recover actual damages, liquidated damages at two (2) times the amount of actual damages, and attorney fees and costs.
Live from Workplace Horizons 2025 – Emerging AI + Related Tech Issues in the Workplace [Video, Podcast]
Welcome to this special edition of We get work®. Over 500 representatives from 260 companies gathered together to share valuable insights and best practices on workplace law issues impacting their business today.
CMMI’s New Strategic Direction: Trump Administration’s “Make America Healthy Again” Strategy
On May 13th, the Centers for Medicare & Medicaid Services (CMS) Administrator, Dr. Mehmet Oz, and CMS Deputy Administrator and Innovation Center Director, Abe Sutton, hosted a webinar to discuss a new strategic direction for the Center for Medicare and Medicaid Innovation (CMMI). Responding to the Trump Administration’s strategy to “Make America Healthy Again,” Administrator Oz and Director Sutton discussed the three pillars of the CMMI’s new strategic direction: (1) promote evidence-based prevention; (2) empower people to achieve their health goals; and (3) drive choice and competition for people (Strategic Direction).1 This blog will provide an overview of the CMMI and the Strategic Direction outlined during the webinar and materials posted on CMMI’s website.
I. Overview of the CMMI
The CMMI, also known as the “Innovation Center,” was authorized under the Affordable Care Act (ACA) with the goal of designing, implementing, and testing new health payment models to address quality of care and efficient resource management. Although the focus of the CMMI is on Medicare, Medicaid, and CHIP programs, the CMMI also develops interventions that affect patients with commercial insurance, such as multi-payer alignment models.
The ACA funded the CMMI with US$10 billion for years 2011 through 2019 and allocated another US$10 billion to the CMMI each decade thereafter. Notably, this funding is not subject to standard Congressional appropriations procedures. Under the management of CMS, the CMMI has launched over 40 new payment models, including accountable care organizations (ACOs), bundled payment models, and medical home models.
II. New Strategic Direction of CMMI
In their webinar, Administrator Oz and Director Sutton described the three pillars of the CMMI’s Strategic Direction and highlighted the supporting public policy objectives.2 Administrator Oz and Director Sutton stated that the costs that America’s health care systems bear are unsustainable and stressed the need for health care in America to focus on the treatment and prevention of the root causes of diseases as opposed to purely treating symptoms that can lead to poor outcomes for patients.3 To address these challenges, Director Sutton stated that CMS’s Strategic Direction will “leverage innovation and smart public policy” to help people stay healthier longer and also protect federal taxpayers.4
1. Strategic Pillar #1: Promote Evidence-Based Prevention
The first pillar is to “promote evidence-based prevention” by planning to incorporate prevention in all payment model designs.5 Such prevention mechanisms include offering patients incentives for sustained lifestyle changes and lifestyle education and support.6 Additionally, Director Sutton stated that the next phase of the CMMI models will offer patients access to “evidence-based holistic medicine approaches.”7 To drive adoption of such prevention-based activities, Director Sutton also announced that the CMMI will leverage incentives and “utilize waivers to drive preventive care and seek opportunities for patients through community organizations providing evidence-based activities.”
2. Strategic Pillar #2: Empower People to Achieve Their Health Goals
Director Sutton announced that the second pillar is to “empower people to achieve their health goals which starts with giving patients better access to information, tools and support to help them live healthier lives.”8 The CMMI intends to increase patient access to relevant and usable data, so patients can appreciate and understand their health status, set health goals with their providers, avoid out-of-pocket costs, and engage in their care more effectively.9
Director Sutton stated that the CMMI is assessing several tools focused on helping patients make more informed decisions about their care by providing insights into provider cost and performance.10 Moreover, the CMMI intends to “leverage technology and data-sharing, both for the benefit of patients to adopt healthier behaviors and for providers to deliver coordinated care.” Lastly, the CMMI intends to “align financial incentives with flexibilities of health,” which may include the use of waivers to support predictable cost-sharing for certain services, drugs or devices or other performance incentives tied to patient-centered quality measures, including lifestyle.11
3. Strategic Pillar #3: Drive Choice and Competition
The final strategic pillar is to “drive choice and competition.”12 This pillar focuses on testing different models and features that can promote competition in health care markets.13 The CMMI intends to promote models that support a variety of practices and providers, such as those in rural communities and those treating patients with chronic conditions, in order level the playing field for independent practices and providers.14
The CMMI intends to promote choice in care and posed different potential mechanisms it may implement in accordance with this pillar, such as requiring site-neutral payments across settings “to reduce costs and reinvest hospital capacity in outpatient and community-based care through changes to certificate of need requirements” and expanding scopes of practice, virtual care, and at-home care so patients can receive care more flexibly. However, Director Sutton did not have an exact date as to when providers can receive additional information on its new models or changes to existing models.
Notably, Director Sutton expressed concerns about the administrative burden experienced by providers attempting to enter into value-based arrangements. In response, the CMMI intends to standardize model design features where appropriate (e.g., quality measures, benchmarking, and attribution) to reduce the administrative burden of participating in advanced alternative payment models and support multi-payer alignment. In doing so, the CMMI will be assessing models across their life cycles to determine indicators of savings to federal taxpayers.
Indeed, as part of the CMMI’s larger effort to protect federal taxpayers, the CMMI has committed that all models have downside financial risk and require providers to assume some of the financial risk. Further, the CMMI has stated it intends to push Medicare and Medicaid beneficiaries to accountable care arrangements with providers who assume global downside financial risk.15
III. Conclusion
The CMMI’s Strategic Direction in response to the Trump Administration’s strategy to “Make America Healthy Again” focuses on providing patients with information and incentives to engage in healthy lifestyles and prevent and/or mitigate disease with increased access to care. The Strategic Direction is not a departure from the statutory goals of the CMMI. Rather, the CMMI will provide a host of new informational, care management, non-clinical, and clinical tools to patients with, or a likelihood of developing, chronic conditions and target efforts to certain provider types historically not included in models. The result of these activities is to encourage patient engagement in healthy lifestyles and prevent and/or mitigate diseases with increased access to care.
Participants in current CMMI models should watch for potential changes to program design and potential expansion of programs to accommodate new Medicare and Medicaid beneficiaries. Existing attribution and participating consent processes utilized in existing models will likely need to be reworked to support efforts to mandate participation of beneficiaries. Further, the Strategic Direction appears to open the door to non-traditional providers, like care management platforms. These organizations should likewise watch for potential model expansions or announcements which may offer an opportunity to demonstrate their value propositions as part of broad reimbursement models.
Footnotes
[1]CMS Innovation Center Strategy to Make America Healthy Again, Ctrs. for Medicare & Medicaid Servs., (April 13, 2025), https://www.cms.gov/newsroom/press-releases/dr-mehmet-oz-shares-vision-cms.
[2] Webinar: CMS Innovation Center’s 2025 Strategy to Make America Healthy Again (Centers for Medicare & Medicaid Services 2025) (webinar recording not yet released) [hereinafter Webinar: CMS Innovation Center’s 2025 Strategy to Make America Healthy Again]
[3]Webinar: CMS Innovation Center’s 2025 Strategy to Make America Healthy Again.
[4]Id.
[5]Id.
[6]Id.
[7]Id.
[8]Id.
[9]CMS Innovation Center Strategy to Make America Healthy Again, Ctrs. for Medicare &Medicaid Servs., (April 13, 2025), https://www.cms.gov/newsroom/press-releases/dr-mehmet-oz-shares-vision-cms.
[10]Webinar: CMS Innovation Center’s 2025 Strategy to Make America Healthy Again.
[11]Webinar: CMS Innovation Center’s 2025 Strategy to Make America Healthy Again.; Strategic Direction, Ctrs. for Medicare & Medicaid Servs., May 13, 2025, https://www.cms.gov/priorities/innovation/about/strategic-direction.
[12]Strategic Direction, Ctrs. for Medicare &Medicaid Servs., May 13, 2025, https://www.cms.gov/priorities/innovation/about/strategic-direction.
[13]Id.
[14]Id.
[15]Id.
Nanterre Court of Justice Issues First Decision About Introduction of AI in the Workplace in France
For the first time, a French court has ruled on the implementation of artificial intelligence (AI) processes within a company.
Quick Hits
For the first time, a French court has ruled on the implementation of AI processes within a company, emphasizing the necessity of works council consultation even during experimental phases.
The Nanterre Court of Justice determined that the deployment of AI applications in a pilot phase required prior consultation with the works council, leading to the suspension of the project and a fine for the company.
The ruling highlights the importance for employers of carefully assessing the scope of AI tools experimentation to ensure compliance with consultation obligations and avoid legal penalties.
More specifically, the Nanterre Court of Justice was called upon to determine the prerogatives of the works council when AI technologies are introduced into the workplace.
In this case, a company had presented in January 2024 to its works council a project to deploy new computer applications using artificial intelligence processes.
The works council had asked to be consulted on the matter and had issued an injunction against the company to open the consultation and suspend the implementation of the new tools.
The company had finally initiated the works council consultation, even if it considered that a mere experimentation of AI tools could not fall into the scope of the consultation process of the works council.
However, the works council, considering that it did not have enough time to study the project and did not have sufficient information about it, took legal action to obtain an extension of the consultation period with suspension of the project under penalty of a fine of €50,000 per day and per offense, as well as €10,000 in damages for infringement of its prerogatives because the AI applications submitted for its consultation had been implemented without waiting for its opinion.
On this point, it should be noted that in France, the works council, which is an elected body representing the company’s staff, has prerogatives that in some cases oblige the employer to inform it, but also to consult it, before being able to make a final decision. The consultation process means that the works council renders an opinion about the project before any implementation. This opinion is not binding, which means the employer can deploy the project even if the works council renders a negative opinion.
However, in the absence of consultation prior to the implementation of the project, the works council may take legal action to request the opening of the consultation and the suspension of the implementation of the project under penalty. The works council may also consider that failure to consult infringes its proper functioning, which is a criminal offense.
Indeed, in application of Article L.2312-15 of the French Labor Code,
[t]he social and economic committee issues opinions and recommendations in the exercise of its consultative powers. To this end, it has sufficient time for examination and precise, written information transmitted or made available by the employer, and the employer’s reasoned response to its own observations. […] If the committee considers that it does not have sufficient information, it may refer the matter to the president of the court, who will rule on the merits of the case in an expedited procedure, so that he may order the employer to provide the missing information.”
Within the area of new technologies, the prerogatives relating to consultation of the works council are numerous and variable, as it is stipulated that in companies with at least fifty employees, the works council must be:
informed and consulted, particularly when introducing new technologies and any significant change affecting health and safety or working conditions (Article L.2312-8 of the Labor Code);
informed, prior to their introduction into the company, about automated personnel management processes and any changes to them, and consulted, prior to the decision to implement them in the company, about the means or techniques enabling the monitoring of employees’ activity (Article L.2312-38 of the Labor Code); and
consulted where a type of processing, particularly when using new technologies, and taking into account the nature, scope, context, and purposes of the processing, is likely to result in a high risk to the rights and freedoms of natural persons, the controller shall carry out, prior to the processing an analysis of the impact of the envisaged processing operations on the protection of personal data (article 35(9) of the European Union’s General Data Protect Regulation (GDPR)).
In addition, regarding AI applications, it is worth noting that the EU’s regulation of June 13, 2024, on AI (Regulation (EU) 2024/1689) provides in its Recital 92 that in certain cases the
Regulation is without prejudice to obligations for employers to inform or to inform and consult workers or their representatives under Union or national law and practice, including Directive 2002/14/EC of the European Parliament and of the Council, on decisions to put into service or use AI systems. It remains necessary to ensure information of workers and their representatives on the planned deployment of high-risk AI systems at the workplace where the conditions for those information or information and consultation obligations in other legal instruments are not fulfilled. Moreover, such information right is ancillary and necessary to the objective of protecting fundamental rights that underlies this Regulation. Therefore, an information requirement to that effect should be laid down in this Regulation, without affecting any existing rights of workers.
In the case at hand, the company considered that the works council consultation was irrelevant as the AI tools were in the process of being tested and had not yet been implemented within the company.
However, the Nanterre Court of Justice, in a decision of February 14, 2025 (N° RG 24/01457), ruled that the deployment of the AI applications had been in a pilot phase for several months, involving the use of the AI tools, at least partially, by all the employees concerned.
To reach this conclusion, the court relied on the fact that certain software programs, such as Finovox, had been made available to all employees reporting to the chief operating officer (COO) and that the employees of the communications department had all been trained in the Synthesia software program. As such, the employer could not validly claim that such an implementation was experimental since so many employees had been trained and allowed to use AI tools.
The court, therefore, considered that the pilot phase could not be regarded as a simple experiment but should instead be analyzed as an initial implementation of the AI applications subject to the prior consultation of the works council.
The court therefore ordered:
the suspension of the project until the end of the works council consultation period, subject to a penalty of €1,000 per day per violation observed for ninety days; and
the payment of damages amounting to €5,000 to the works council.
Key Takeaways
In light of the Nanterre Court of Justice’s ruling, employers in France may want to remain cautious before deploying AI tools, even if it is worth noting that:
the ruling is only a summary decision, i.e., an emergency measure pending a decision on the merits of the case; and
this decision confirms that an experimental implementation of AI might be feasible, provided that it is followed by an information and consultation of the works council, prior to a complete deployment of AI tools. However, the range and scope of this experimentation is to be assessed with care because a court might consider the experiment actually demonstrates that a decision to implement AI was irrevocably taken.