Overview This edition of the Private Company Report highlights critical updates and regulatory changes affecting private companies, including the new beneficial ownership reporting requirements under the Corporate Transparency Act, CFIUS Report insights, California Privacy Protection Agency updates, the new California employment laws and significant litigation rulings. Staying informed on these topics is crucial for effective compliance and strategic planning. Highlights include: The Corporate Transparency Act: A reference guide to beneficial ownership reporting requirements. For entities formed before January 1, 2024, your report is due by January 1, 2025. CFIUS Report: Insights from the latest report from the Committee on Foreign Investment in the United States. California Privacy Protection Agency: Latest updates on cybersecurity regulations and Enforcement Advisory on the importance of avoiding dark patterns. California Employment Law: Recently enacted legislation in California ushers in a new era of worker protections. FTC Non-Compete Ban: Federal Court strikes down non-compete ban. In This Edition Overview 1 Regulatory Updates 2 Corporate Transparency Act CFIUS 2023 Annual Report Shows Committee Continues to Evolve California Privacy Protection Agency Updates Employment Law Updates 4 California Ushers in a New Wave of Employment Laws Litigation Spotlight 5 Federal Court Strikes Down FTC's NonCompete Ban Key Considerations for Private Companies Based on Recent Legal Updates 5 Third Quarter 2024 Private Company Report Key Issues Impacting Private Companies 2 Private Company Report Key Issues Impacting Private Companies Regulatory Updates Corporate Transparency Act Entities formed or registered to do business in the United States on or before December 31, 2023 will need to file a Beneficial Ownership Information ("BOI") Report with the US Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN") pursuant to the Corporate Transparency Act ("CTA") by January 1, 2025, unless the entity is subject to an exemption to the reporting requirements. Entities formed or registered to do business in the United States on or after January 1, 2024 are required to report within 90 days of formation or registration if formed in 2024, and within 30 days of formation or registration if formed in 2025 or later. Please see our reference guide below for a step-by-step flow chart to assist in determining if your entity needs to make a BOI filing. 3 Private Company Report Key Issues Impacting Private Companies Licensed or Registered Exempt Entity Definitions 4 Private Company Report Key Issues Impacting Private Companies CFIUS 2023 Annual Report Shows Committee Continues to Evolve On July 23, 2024, the Committee on Foreign Investment in the United States ("CFIUS") released its annual report to Congress for calendar year 2023. CFIUS is an interagency body chaired by the Secretary of the Treasury that is empowered to review investment in the United States that could result in a foreign person acquiring control of, or in some cases, certain governance rights in connection with a minority investment in, a U.S. Business. Key Takeaways: CFIUS is becoming more aggressive in carrying out its monitoring and enforcement responsibilities: CFIUS issued twice as many penalties in 2023 than it had in its entire history and undertook several investigations regarding potential violations of mandatory filing requirements. This sharp increase shows that CFIUS is prepared to be more aggressive in asserting its discretionary enforcement authority. The number of JVNs and Declarations submitted to CFIUS decreased compared to recent years, but CFIUS continues to actively pursue "non-notified" transactions: While the number of JVNs and Declarations filed with CFIUS in 2023 decreased significantly compared to 2022, CFIUS has enhanced its processes for identifying non-notified transactions. Parties to a transaction subject to CFIUS's jurisdiction should carefully weigh the benefits and burdens of making a voluntary filing against the risks of disruption that could flow from foregoing a filing and then being contacted by Treasury after (and sometimes long after) the deal is closed. The kinds of mitigation measures imposed by CFIUS continues to evolve to match the identified risks: CFIUS adopted several new measures and conditions to mitigate risks identified by reviewed transactions in 2023. For more detailed information on CFIUS' 2023 annual report, please see our client alert. California Privacy Protection Agency Updates CPPA Declines to Advance New Draft Regulations The California Privacy Protection Agency ("CPPA") Board has postponed the finalization of regulations related to cybersecurity audits, risk assessments, automated decision-making technology (ADMT) and insurance companies, as well as updates to existing regulations. For more information on the draft regulations, please see our client alert. Paul Hastings will continue to monitor any future progress regarding the draft regulations and updates to existing regulations. CPPA Issues Warning to Businesses: Avoid Dark Patterns On September 4, 2024, the CPPA issued an Enforcement Advisory on the importance of avoiding dark patterns, which the CPPA defines as a user interface designed or manipulated with the substantial effect of subverting or impairing user autonomy, decision making or choice. Dark patterns include any activities that may delay or obscure the process for opting out of the sale or sharing of personal information or otherwise burden consumers with confusing language or unnecessary steps when exercising their privacy rights. The Enforcement Advisory highlights the CPPA's focus on ensuring consumer autonomy and choice and advises businesses to ensure their user interfaces are using language that is easy for consumers to understand and offers symmetrical choices when customers are making privacy decisions. For more information on the CPPA Enforcement Advisory, please see our client alert. Employment Law Updates California Ushers in a New Wave of Employment Laws Over a dozen bills from the California Legislature have recently been signed into law, effective next year. As a result, many California employees will begin next year with new and enhanced rights related to wages, discrimination, retaliation, leave and workplace disclosures, among others. 5 Private Company Report Key Issues Impacting Private Companies About Paul Hastings With widely recognized elite teams in finance, mergers & acquisitions, private equity, restructuring and special situations, litigation, employment, and real estate, Paul Hastings is a premier law firm providing intellectual capital and superior execution globally to the world's leading investment banks, asset managers, and corporations. Paul Hastings LLP Stay Current is published solely for the interests of friends and clients of Paul Hastings LLP and should in no way be relied upon or construed as legal advice. The views expressed in this publication reflect those of the authors and not necessarily the views of Paul Hastings. For specific information on recent developments or particular factual situations, the opinion of legal counsel should be sought. These materials may be considered ATTORNEY ADVERTISING in some jurisdictions. Paul Hastings is a limited liability partnership. Copyright © 2024 Paul Hastings LLP Key Highlights: Hours and Wage Adjustments: Changes include, among other things, new protections for freelance workers, including setting out minimum requirements for contracts with hiring parties and non-retaliation protections, an increase in the minimum wage for all California employees to $16.50 per hour, and new exemptions for certain restaurants from paying the fast food worker minimum wage. Discrimination, Retaliation and Harassment: Changes include a ban on "captive audience" meetings (i.e., mandatory political, anti-union or religious meetings held by employers during work hours), an expansion of leave and workplace protections for victims and survivors of violence, limitations on requiring prospective employees to have a drivers license in job applications, and protections from discrimination on the basis of "intersectionality" (i.e., a combination of protected characteristics), among other things. Leave & Workers' Compensation: Changes include worker-friendly amendments to California's paid family leave law and workers' compensation laws. Disclosure and Posting Obligations: Changes include amendments to whistleblower posting requirements and disclosure requirements for social compliance audits. Artificial Intelligence: Changes include new restrictions on contracts involving the use of "digital replicas," among other things. For more details on the new California employment laws, please see our client alert. Litigation Spotlight Federal Court Strikes Down FTC's Non-Compete Ban On August 20, 2024, the Northern District of Texas issued its final ruling in Ryan, LLC. v. FTC, finding the Federal Trade Commission's Non-Compete Rule (the "Rule"), which would have prohibited most employee non-compete agreements, unlawful. As a result, the Rule did not take effect on its effective date of September 4, 2024. For more information on the court's decision, please see our client alert. Key Considerations for Private Companies Based on Recent Legal Updates Regulatory Compliance and Risk Management: Have you evaluated whether your company is subject to the new beneficial ownership requirements under the Corporate Transparency Act? Have you taken steps to prepare for compliance with the new regulations? Have you reviewed your risk management strategies in light of a more aggressive enforcement of CFIUS requirements and the CPPA's increased focus on data privacy enforcement? Employment Law and Workforce Management: Have you reviewed your policies to ensure compliance with the new California employee protection laws?