As we enter the new year, we often look forward to business growth potential and resolutions to improve our professional and personal lives. Perhaps this year, more than any other in recent memory, we anticipate a great amount of change that may improve our health, economy and social interactions. Part of this anticipation can include examining present legal trends that may affect your forge in 2021.


Foreign Investment

Many of your operations include international business transactions. Therefore, you should be aware of the Committee on Foreign Investment in the United States (CFIUS) and its strict rules surrounding foreign investment. CFIUS is a multi-agency governmental body that is comprised of nine cabinet-level Executive Branch agencies and offices along with other agencies. CFIUS was created over 30 years ago to address national security concerns while enhancing the confidence in investment made in the U.S.

In October 2020, CFIUS issued updated regulations that relate to mandatory filings under CFIUS. Mandatory filings are no longer triggered by a transaction within a specific industry, but rather the regulatory scheme focuses on the export controls that would apply to “critical technologies” owned or used by your forge. Generally, mandatory declarations for covered transactions involve American businesses that produce, design, test, manufacture, fabricate or develop one or more critical technologies. Critical technologies are those that require a license or authorization for export, re-export, transfer or retransfer.

If these rules apply to your products, you need to determine how the products and technologies would be classified for export, even if your forge does not export some or any of its products or technology. If a license requirement or regulatory approval exists with respect to the transfer or access by the foreign investor or its owners to the critical technology, then a mandatory filing requirement may exist.



The pandemic federal stimulus package enacted in late December revives many of the previous CARES (Coronavirus Aid, Relief, and Economic Security) Act’s successful aid programs, such as the Paycheck Protection Program (PPP). The legislation both revises the rules that apply to previously issued PPP loans and provides new rules intended to cover future PPP payments. First-time borrowers are eligible if they meet the original PPP loan eligibility requirements. Entities eligible for a second PPP loan will include businesses with 300 or fewer employees, some nonprofit organizations (with eligibility expanded to include 501(c)(6) organizations), self-employed workers and independent contractors. Borrowers who received a PPP loan under the CARES Act are eligible for a second loan if they can demonstrate a 25% reduction in gross receipts in any 2020 quarter as compared to the same quarter in 2019. The Small Business Administration (SBA) is expected to provide additional information about the PPP’s second round by February, including the following:

  • Amount – Borrowers can receive 2.5 times their average monthly payroll costs (3.5 times for borrowers in the hospitality or food services industries). Loans are capped at $2 million.
  • Forgiveness – Funds spent on eligible expenses may be forgiven if at least 60% of the funds are spent on payroll costs. Eligible expenses include those in PPP 1.0 (mortgage, rent, utilities and payroll) and the following additional expenses: covered operations expenditures (e.g., software, cloud computing, HR and accounting needs); covered property damage (costs related to property damage due to public disturbances that occurred in 2020 but not covered by insurance); covered supplier costs (expenditures that are essential to the borrower’s operations); and covered worker protections (e.g., personal protective equipment). Forgiveness for loans under $150,000 will likely be significantly easier to obtain.
  • Tax Effects – Forgiven PPP loan amounts are not includable as gross income for borrowers. Additionally, borrowers may take tax deductions for expenses ultimately covered by PPP loan funds.
  • Unemployment – Individuals may receive up to 50 weeks of benefits and $300 in Federal Pandemic Unemployment Compensation to supplement state benefits.
  • Recovery rebates – The bill provides a one-time refundable tax credit (more popularly known as a stimulus check) of $600 to all eligible citizens. The credit phases out starting at $75,000 ($150,000 for married filing jointly) and is completely phased out at $100,000 ($200,000).
  • Paid sick leave – The Families First Coronavirus Response Act’s payroll tax credits for paid sick and family leave are extended through March 2021.

There are a vast number of grants, loans, tax credits and other types of relief available for businesses of all sizes. A number of clarifications and rules will likely be issued in the first quarter of 2021, including further guidance from the SBA.


Doing Business with Debtors

Continuing business relationships when your customer declares bankruptcy can be difficult but worthwhile. Once you learn that a customer has filed for bankruptcy, you should stop attempting to collect debts that arose prior to the bankruptcy filing, cease pre-petition litigation and not initiate any new lawsuits, and otherwise avoid any collection efforts outside of the bankruptcy process. Additionally, creditors can request relief from the automatic stay, such as to seek to foreclose on secured collateral.

You may continue to do business with the debtor, but it is not required to continue doing business with a customer that has filed for Chapter 11 bankruptcy in many instances. There are times, such as when there is an existing contract in place obligating them to perform, that vendors and suppliers may have no choice but to continue the relationship. If you do not have a contract in place with the debtor that compels you to perform according to established terms and conditions, you can seek to supply goods and services according to terms different from your historical course of performance, such as demanding cash in advance or cash on delivery instead of extending credit. To the extent that you have goods in transit to your customer when you learn of a bankruptcy, you can stop shipment.

Goods and services provided to the debtor after the petition date are considered “administrative claims” entitled to a higher priority than pre-petition unsecured claims as long as they are, under Section 503(b)(1)(a) of the Bankruptcy Code, “actual, necessary costs and expenses of preserving the estate...” Typically, the normal operating expenses of a business fall within this definition. Therefore, many vendors continue to do business with a debtor as long as their administrative claims are paid. If (and it is a big if) the debtor has sufficient cash flow and/or debtor-in-possession financing to operate, the risk of not being paid while a debtor is in Chapter 11 tends to be low.



All of the above points are regulated by federal and state laws, so you will need to contact your business attorney with any questions. Armed with the knowledge of how some regulations and laws have recently changed, you can devote time to other pressing matters, such as meeting your production goals.