Thread by @EdGrapeNutZimm

@bijans @trevorloy So, a few things:
1) we've been saying that the analysis is 301(f), not full 103. That's important because 301(f) = way better for Venture-backed #startups seeking #SBALoans. See @Forbes forbes.com/sites/edwardzi…

@bijans @trevorloy @Forbes 2) Treasury's release from last night confirms this understanding of the plain language of the #affiliationRules applied to #PPP for #SBALoans under #Section7a (cc @DougBernstein who shared our view/analysis from early on)
home.treasury.gov/system/files/1…

@bijans @trevorloy @Forbes @DougBernstein 3) Here's how we read the language @trevorloy quoted (we start with 301(f) (as per what we published last Monday) lowenstein.com/news-insights/… cc @LowensteinLLP

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP 4) Read 301(f)(1) speaks to ownership & control via #ProtectiveProvisions (customary in VC deals). 301(f)(2) speaks to how to calculate #convertibleSecurities & the language @trevorloy cited is 301(f)(2)(iv)

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP 5) Say you own 52% & take a "Put" right to enable you to sell 1/2 your shares back to the company @ any time for $100. 301(f)(2)(i) seems to allow you to assume you've exercised that right, so you no longer "control" (even though you truly do still control)...enter (f)(2)(iv)...

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP 6) 301(f)(2)(v) says "not so fast, buddy" You can't pretend to give away ownership that way. HOWEVER, for protective provisions, if you agree to waive starting now, that is not about pretending to sell down your voting stock, & it is actually effective now. So, ...

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP 7) agreeing to waive #ProtectiveProvisions now shouldn't run afoul of 301(f)(ii)(4)'s "cannot use options, convertible securities, or agreements to appear to terminate such control before actually doing so." cc @JeffFarrah in case he/ @nvca have a different view

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP @JeffFarrah @nvca 8) 2 distinctions: (A) actually waiving now differs from an option to do so later, (B) (f)(ii)(4) is w/in the convertible security subsection (which isn't where the protective provision language lives). &

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP @JeffFarrah @nvca 9) The goal of (f)(ii)(4) is shutting down avoidance techniques while allowing the "Affiliate" to actually retain control. A Put Right would do that, but actually selling NOW or actually waiving #ProtectiveProvisions NOW would cede that control now. Make sense?

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP @JeffFarrah @nvca 10) My @LowensteinLLP partners published guidance on the @SBAgov's #InterimFinalRule (see #affiliation clarification below) - more to come! #SbaLoans
lowenstein.com/news-insights/…

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP @JeffFarrah @nvca @SBAgov 10) & last night @USTreasury also released "clarification" on "affiliation rules" & it's largely just a quote of 301(f)...
sba.gov/sites/default/…

@bijans @trevorloy @Forbes @DougBernstein @LowensteinLLP @JeffFarrah @nvca @SBAgov @USTreasury 11) "However, detailed affiliation standards in section 121.103 currently do not apply to PPP borrowers, because section 121.103(a)(8) provides that applicants in @SBAgov Business Loan Programs (which include the PPP)are subject to the affiliation rule in 13 CFR 121.301"