With the outbreak of the COVID-19 pandemic, the United States government enacted the Coronavirus Aid, Relief and Economic Security (CARES) Act. The volume of assistance, totalling USD 2.8 trillion, provided financial aid to individuals and organizations facing economic hardship and access to loans with convenient terms for the purpose of paying salaries and other specific expenses under a program called the Paycheck Protection Program (PPP). Many Israeli companies operating in the United States also submitted applications for grants and loans under the PPP. The initiative, while commendable, also opened the door for those seeking to exploit the government assistance to commit fraud and deceit.

In the regular corporate world, the capital structure of a company usually means the ratio between the company’s equity (money the company’s owners invested in it) and debt capital (external funding injected into the company by banks and other loans). For technology companies, however, the term “capital structure” usually refers to the division of the company’s ownership among the entrepreneurs and investors subsequent to the investment rounds in the company. Thus, holding 50 shares of a regular company that has 1,000 issued shares represents ownership of 5% of the company’s shares and entitlement to receive 5% of its distributable profits. However, if you hold 50 shares of a tech startup company that has 1,000 issued shares, this does not necessarily mean you are entitled to receive 5% of the proceeds in the event of an “exit” and the startup’s sale to a third party. Over the years, investors and entrepreneurs in startup companies have developed ownership structures that bear no resemblance to the ownership formula used in “regular” companies.

By October, companies in the European Union employing at least 50 employees will be required to operate an internal reporting system for reporting misconduct that may indicate compliance violations. Furthermore, all companies in the EU, regardless of size, will be required to ensure the protection of whistleblowers from all types of retaliation. The EU Whistleblower Protection Directive originally came into force in October 2019. It gave EU member states two years to prepare to incorporate the directive into their national legislation. Prior to the enactment of the directive, no uniform binding legislation applied to all EU member states and only 10 member states had enacted national legislation in this regard. The upcoming inception of national whistleblower protection laws throughout the EU will naturally trigger a ripple effect.