Trending in Transactions - Q2 2026

Employment

Don’t forget about WARN

By: Joshua Elefant

The Worker Adjustment and Retraining Notification Act (WARN) is a federal law covering employers with 100 or more employees. Under certain circumstances, it requires covered employers to provide 60 days’ advance notice of a “mass layoff” or “plant closing.” In addition, some states have enacted their own versions of the law that provide similar protections, which, in some cases, may cover employers with fewer than 100 employees. 

When a business is sold, an employee may experience a technical termination of employment, even if the employee goes on to work for the buyer (albeit in a different job or with different wages). As long as the changes to an employee’s wages and working conditions do not constitute a constructive discharge (which is determined on a case-by-case basis and by applicable state law), such technical terminations may not constitute an employment loss under WARN. 

Where the seller’s employees will not be employed by the buyer post-close and the number of employees experiencing an “employment loss” triggers WARN (or a similar state law), the timing of the employment loss determines whether the seller or the buyer is responsible for providing the required WARN notice. If the employment loss occurs prior to the closing, the seller is responsible for giving notice. When the employment loss is expected to occur within 60 days after the closing, the buyer may need to give notice (in coordination with the seller) in advance of the closing. Because the failure to properly provide advance notice can lead to class actions and potentially significant liability (including damages for the period of notice not provided, as well as the recovery of attorneys’ fees), buyers that are considering a reduction in force following the closing should ensure they evaluate whether WARN will be triggered and comply with any obligations under the law.

Global equity

RSUs and IPOs: Tax considerations for a global workforce

By: Brian Stanton

Private multinational companies that have switched from options to restricted stock units (RSUs) to create greater economic upside for their workers are encouraged to consider the tax implications for RSUs that will begin to vest outside the United States upon an initial public offering (IPO). 

Private company RSUs typically impose two vesting conditions: 1) A time/service-based condition that requires workers to provide continuous service for a specified period and 2) a liquidity event condition, which is often satisfied upon the occurrence of an IPO. This “double-trigger” or “dual-vesting” structure is generally intended to solve a fundamental cash flow problem: It may be difficult to find enough cash to satisfy tax withholding obligations or pay personal tax bills before a company goes public. But cash flow issues may persist outside the US depending on the timing of taxation in a particular country.

For example, RSUs are taxed at vesting in some countries, even if the shares are not delivered until a later date (e.g., until the end of a post-IPO lock-up period). If an employer in a relevant country must withhold taxes on RSUs that vest upon an IPO, underwriters will typically permit sell-to-cover or net settlement transactions to generate cash for this purpose, even during a lock-up. But workers in some countries may face a cash flow squeeze if they are responsible for paying taxes on their own and their tax bills are due before the expiration of a lock-up.

Proactive planning for companies approaching an IPO may help ease the administration of RSU awards internationally, mitigate potential cash flow issues, and avoid worker dissatisfaction. Companies are encouraged to consider working with legal and tax advisors to understand the tax withholding and reporting rules outside the US, and to model the cash flow implications of different settlement structures for workers in different countries.

Insured transactions

Directors and officers: Indemnification and anti-roundtripping

By: Matthew Flug and Huntington Domine

Purchase agreements often include covenants requiring the surviving company to maintain the indemnification and advancement rights of its pre-closing directors and officers under existing organizational documents and indemnification agreements. To prevent those obligations from effectively financing the defense of claims asserted by the buyer against the seller under the purchase agreement, buyers typically include an “anti-roundtripping” or “anti-circularity” provision stating that such indemnification and advancement obligations do not apply to losses or expenses for which the buyer is seeking recovery from the seller. 

This is relevant for transactions subject to Delaware law, as the Delaware Court of Chancery has held that, absent such a provision, former directors and officers are entitled to advancement of defense expenses in connection with the buyer’s post-closing claims for breach of the purchase agreement, where defending those claims required them to defend actions taken in their official capacities. Because many transactions are governed by Delaware law, this topic has not been similarly tested under other state laws. Therefore, buyers are encouraged to consider such provisions in purchase agreements governed by the law of other states to mitigate the risk of a less favorable court-driven outcome.

Intellectual property

Preparing for a sale: IP ownership documentation and potential gaps

By: Priya Narahari

When contemplating a sale, companies should ensure that all their intellectual property (IP) is properly owned by them.

For copyrightable works, including software, an entity may own the work as either a work made for hire or via an assignment, depending on the circumstances. In general, under US copyright law, copyrightable works created by an employee within the scope of employment are automatically owned by the employer as works made for hire – no written agreement is necessary. But for works created by contractors/non-employees and for other forms of IP, such as patents, ownership must be transferred in a signed written agreement.

Where written transfers of ownership are required, courts have recognized important distinctions between present- and future-tense language when determining IP ownership. As such, to ensure that all IP developed by an employee (or contractor) is properly transferred to the employer, IP assignment agreements should include a present-tense assignment of IP rights (e.g., “hereby assigns”) rather than merely a future promise to assign (e.g., “will assign” or “agrees to assign”). The agreements should also broadly cover inventions, software, documentation, know-how, and all other IP developed within the scope of employment, whether they relate to the company’s business or were developed using company resources, subject to any applicable state law limitations. Further, because certain types of copyrightable works developed by contractors/non-employees can be considered works made for hire, contractor agreements should typically include both a “work for hire” clause and a present-tense assignment of all rights in deliverables and related IP to the company.

Companies should also consider verifying that assignments were obtained from contractors engaged through staffing firms, development shops, or consulting companies, as ownership may be unclear under those arrangements. For patents and patent applications, companies are encouraged to confirm that all inventors have executed assignments transferring ownership of such patents or patent applications, including corresponding foreign counterparts, and that the assignments are properly recorded with the US Patent and Trademark Office and any applicable foreign patent offices. Assignments of copyrights and trademarks should be recorded with the applicable government agencies as well.

A clean and well-documented chain of title for IP substantially streamlines buyer diligence, reduces transaction risk, and helps support representations and warranties regarding ownership of IP in the sale agreement. Accordingly, before commencing a sale process, companies are encouraged to identify employees and contractors who developed IP and ensure that appropriate agreements that assign and transfer all developed IP to the company are in place.

Tax

Continuation funds: Preserving tax-free rollover treatment under IRC Section 721

By: Dahlia Ali

In an environment where traditional exit opportunities may not maximize value, private equity sponsors are increasingly using continuation funds to provide liquidity to existing investors while retaining ownership of high-performing assets with additional upside potential. A key tax objective in many of these transactions is preserving tax-free rollover treatment under Internal Revenue Code (IRC) Section 721, which, generally, provides that no gain or loss is recognized when property is contributed to a partnership in exchange for a partnership interest. In the context of continuation funds, this rule can allow rolling investors to defer gain that might otherwise be recognized upon the transfer of their interests into a newly formed vehicle. However, continuation fund transactions could involve features that complicate IRC Section 721 analysis. In addition, parties are encouraged to analyze the disguised sale and deemed cash distribution rules under IRC Sections 707(a)(2)(B) and 752, respectively, to ensure that tax-free treatment is preserved. 

Where rolling investors receive both equity in the continuation vehicle and cash or other non-equity consideration as part of the same integrated transaction, the contribution may not fully qualify for nonrecognition treatment, often due to oversights in sequencing or documentation. Given the economic benefit associated with tax deferral, parties are encouraged to evaluate IRC Section 721 considerations early in the deal process. Common structural mitigations include carefully sequencing capital calls relative to closings and structuring preferred returns to clearly reflect equity characteristics. By thoughtfully designing rollover structures and engaging tax advisors at the outset, private equity sponsors can potentially preserve intended tax outcomes while facilitating efficient transaction execution.