Pension Plan Withdrawal Liability Presents A “Risky Gambit” to Private Equity Funds

Guest post by Michael T. Bindner of Frost Brown Todd LLC

A Federal District Court recently called investments in private companies that participate in a multiemployer pension plan (MPP) a “risky gambit” because of the potential for exposing the MMP’s investors to withdrawal liability[1]. This type of liability is sometimes referred to as a “hidden liability” because, in some situations, investors may have exposure for the liability even if they did not affirmatively assume the liability under a purchase agreement.

Continue reading

10 Tips to Help Companies Prepare for and Manage a PE Investment

Guest post by Angela Humphreys and Michael Geldart from Bass, Berry & Sims PLC and Excellere Partners

In an article published in the ACC Docket, the official publication of the Association of Corporate Counsel, Bass, Berry & Sims attorney Angela Humphreys and co-author Michael Geldart, Chief Compliance Officer and Partner at Denver-based private equity investment firm Excellere Partners, provided 10 tips on how companies can prepare for private equity investment and manage the private equity relationship post-transaction.

Continue reading

Recent Trends in Shareholder Activism

Guest post by Richard J. Grossman and Alexander J. Berg of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates

Shareholder activism remains pervasive in the corporate landscape, as many companies continue to face new, and sometimes more sophisticated, activist situations. Recent activism-related trends indicate that the landscape is continually shifting, and companies’ strategies for dealing with activism should therefore also evolve and adapt.

Continue reading

Private Equity, Venture Capital, and Hedge Funds May Get Boost from SEC

Guest post by Alexandra M. Fenno , Lauren C. Jackson , John I. Sanders , Jeffrey T. Skinner from Kilpatrick Townsend & Stockton LLP

On June 18th, the SEC issued a concept release (the “Concept Release”) seeking public comment on ways to simplify, harmonize, and improve the rules related to private securities offerings.[i]  The Concept Release contains several elements, three of which suggest that the SEC may take action that would benefit private investment funds:

Continue reading

New Massachusetts Noncompetition Law Will Impact PE Investors

Guest post by Richard William Kidd, Edward Holzwanger, and Matthew D. Keiser – Kirkland & Ellis LLP

On October 1, 2018, a new Massachusetts noncompetition statute went into effect that will impact PE investors with offices or portfolio companies located in Massachusetts. The key provisions of the new law are set forth below.

Definition Of “Noncompetition Agreement”

The new law broadly defines “Noncompetition Agreements” as any agreement in which an employee or independent contractor “agrees that he or she will not engage in certain specified activities competitive with his or her employer after the employment relationship has ended.”  

The new law does not apply to:

  • confidentiality and intellectual property protection provisions;
  • employee nonsolicitation and no-hire provisions;
  • covenants not to solicit or transact business with customers, clients or vendors;
  • restrictions during the employment/contracting relationship;
  • sale-of-business noncompetition provisions where the restricted party is a “significant owner of, or member or partner in, the business entity” and will receive “significant consideration or benefit” from the transaction;
  • noncompetition provisions that are outside of an employment relationship, which seems to imply that partnership, limited liability company, stockholder and other similar agreements in which an individual is a partner, member or owner, rather than an employee, may be exempt from the new law under this exception (particularly where employees of one entity (e.g., a management company) are partners in, or members or owners of, a different entity (e.g., a limited partnership)); or
  • covenants negotiated and entered into at the time of a separation from service, so long as the person is expressly given seven business days to rescind acceptance.

Forfeiture-For-Competition Clauses Are Covered Noncompetition Agreements

The new law covers any “agreement that by its terms or through the manner in which it is enforced imposes adverse financial consequences on a former employee as a result of the termination of an employment relationship if the employee engages in competitive activities.”1

Limits on Noncompetition Period

Noncompetition Agreements may not exceed one year, unless the individual breached his or her fiduciary duty or unlawfully obtained or retained property belonging to the company, in which case the duration may not exceed two years.

Must Be Consideration

Noncompetition Agreements entered into at the inception of the relationship must be supported by garden leave (which is simply severance) or “other mutually-agreed upon consideration,” which is not defined (but initial employment may satisfy this requirement).

Noncompetition Agreements entered into during the relationship must be supported by “fair and reasonable consideration independent of continuation of employment,” which is also not defined.

Until there is further clarity regarding what satisfies the alternative consideration requirements under the new law, consideration other than a provision for the payment of garden leave during the restricted period runs some risk of being deemed to be insufficient.

Garden Leave

Under the new law, a “garden leave” clause is sufficient consideration so long as it requires a company to pay the individual during the restricted period at least 50% of the individual’s highest annualized base salary within the preceding two years.

If garden leave is provided as consideration, it should be paid for the length of the noncompetition period, up to one year.

Individuals Terminated  Without Cause or Laid Off and Nonexempt Employees Cannot Be Bound to Noncompetition Agreements

Any individual who is either (i) a nonexempt employee under the Fair Labor Standards Act or (ii) terminated “without cause” or “laid off” (with both terms being undefined in the law) cannot be subject to a Noncompetition Agreement. The new law is unclear regarding whether a company can still have noncompetition provisions with these individuals so long as the company is providing garden leave.

Alternatively, it may still be possible to secure noncompetition provisions from these employees either by structuring an employment agreement where an employee must give six months or a year of notice prior to terminating his or her employment or as negotiated at the end of the relationship, as both of these situations are not “Noncompetition Agreements” under the new law.

The Law Is Not Retroactive

The new law only applies to agreements entered into on or after October 1, 2018. However, the new law does not address whether amended agreements or evergreen renewals on or after October 1, 2018, trigger the law.

Very Technical Requirements Must Be Satisfied To Have A Valid Noncompetition Agreement

If entered into at the inception of the employment relationship, the employer must provide the candidate with the Noncompetition Agreement either at the time of a formal offer of employment or 10 business days prior to the commencement of employment, whichever is earlier.

If entered into during the employment relationship, the employee must have 10 business days to review the agreement before it becomes effective.

The Noncompetition Agreement must be in writing and signed by the employer and the individual.

The Noncompetition Agreement must explicitly state that the individual has the right to consult with counsel prior to signing.

The Law Covers Employees and Independent Contractors

The new law covers employees and independent contractors who are employed or engaged in Massachusetts — but does not explicitly cover partners, members or owners.

Choice-of-Law Clauses

The new law severely limits the parties’ ability to circumvent its application by choosing another state’s law to govern the agreement.2

*          *          *

Companies with employees in Massachusetts should review and update their form Noncompetition Agreements in light of the new law.  


1. In many states, such as New York, court will not scrutinize the reasonableness of a noncompetition provision so long as the only result of a breach is the loss of some benefit. Massachusetts appears to have foreclosed this legal construct by holding that such forfeiture clauses also need to conform to the parameters of the new law. 


2. All civil actions relating to Noncompetition Agreements must be brought in the Massachusetts county where the individual resides (the new law does not specify that this must be in state court) or, if mutually agreed upon, in Suffolk County in Massachusetts (in the superior court or the business litigation session of the superior court).


Richard William Kidd, Partner, New York

Richard Kidd primarily practices transactional labor and employment law by assisting clients on national and international corporate transactions, negotiating and drafting complex employment-related agreements, onboarding executives, conducting reductions-in-force, and managing executive separations. Read More…

Edward Holzwanger, Partner, Washington, D.C.

Edward Holzwanger concentrates his practice in the areas of employment and labor counseling and transactional due diligence. Read More…

Matthew D. Keiser, Partner, Washington, D.C.

Matthew Keiser is a partner in Kirkland’s Washington, D.C. office. He concentrates his practice in employment law counseling and compliance training, investigations, employment litigation, and employment law aspects of corporate transactions and private equity. Read More…

Kirkland & Ellis LLC

We are a law firm that serves a broad range of clients around the world in private equity, M&A and other corporate transactions, litigation, white collar and government disputes, restructurings and intellectual property matters. We offer the highest quality legal advice coupled with extraordinary, tailored service to deliver exceptional results to our clients and help their businesses succeed. Read More…

CFIUS Reform: How Private Equity Funds Are Affected

Guest post by Rod Hunter, Sylwia A. Lis, and Karl Paulson Egbert, Partners at Baker McKenzie LLP

With the signature of President Trump on August 13, 2018, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) became law. FIRRMA represents the most significant changes to the law governing the Committee on Foreign Investment in the United States (CFIUS or Committee) since the creation of the U.S. foreign investment regime in 1988. Although prompted primarily by national security concerns with Chinese investments, the legislation will affect investments by all non-U.S. investors, including investors in private equity and other funds. The changes reflect a trend across advanced markets for greater scrutiny of investments made via fund vehicles.

Continue reading