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Tuesday
Jan262016

News Update

 News Update - 2/1/2016

Altura Law has joined forces with Impact Law Group PLLC. Niloufar Park has joined Impact Law Group as a partner and continues her business and corporate law practice with a talented team of litigators and labor and employment attorneys. Please read on, and visit Niloufar and her new colleagues at Impact Law Group’s website. Niloufar can be reached at npark@impactlawgroup.com.
Tuesday
Jul072015

New Business and Alcoholic Beverage Laws Taking Effect in Washington State (July 2015)

Another eventful Washington state legislative season delivered substantial number of new laws pertaining to business regulations and alcohol beverages. Most of these new laws will take effect as of July 24, 2015, unless otherwise indicated. This list is made available for general information only and not intended to be a substitute for legal advice.

New Laws Relating to Alcoholic Beverages & Food Operation:

HB 1004 – Alcohol tasting by students under 21 years of age:  In 2013, a new law allowed alcohol tasting by students under age of 21, who enrolled in viticulture, winemaking or culinary arts program. HB 1004 expands that allowance to students enrolled in sommelier, wine business, enology, or viticulture programs.

HB 1124 – Sampling of beer and wine:  While restrictions on sampling of beer and wine at certain locations still applies, a new section of law authorizes certain licensees (domestic winery, qualifying farmers market, grocery store, and beer/wine retailer) to provide samples of two ounces or less of beer and wine free of charge for consumption on the premises, with allowance of maximum of four ounces of samples per customer per day.

HB 1179 – Exempting cider makers from the wine commission assessment (effective date July 1, 2015):  Cider producers are now exempt from an assessment that primarily supports wine production. This change will allow cider makers to support their own marketing efforts rather than being grouped together with wineries.

HB 1342 – Sale of Cider by a microbrewery:  Amendment to existing laws permits any licensed microbrewery to sell cider in a microbrewery tasting room.  However, a microbrewery is still not allowed to sell strong beer (containing eight percent or more alcohol by weight) at farmers market.

HB 1807 – Assisting small businesses licensed to sell spirits in Washington state:  A spirits retail licensee must accept delivery of spirits shipments either at its licensed premises or at one or more warehouse facilities, which are at least ten thousand square feet of fully enclosed retain space and have been registered with Liquor Control Board (LCB). This bill amends the current law allowing a group of licensed retailers to accept delivery of spirits at their individual licensed premises or at a warehouse facility registered with LCB in order to take advantage of volume discounts. Additionally, if a licensee fails to submit its quarterly reports or payments to LCB, the imposed maximum penalty is one percent per month on the balance of unpaid license issuance fee.

SB 5280 – Allowing growler sale of beer and cider by grocery stores:  Microbreweries and wineries are allowed to sell their products in growlers (see previous blog posted dated April and June 2014). A new law goes a step further permitting grocery stores to sell beer and cider in growlers that are provided by the store or by customers. However, some restrictions apply.

SB 5353 – Enhancing marketing opportunities for craft and general licensed distilleries:  Since passage of Initiative 1183 in 2012, laws regulating spirit production and sales are changing to reflect the needs of the industry and consumers, while protecting the public interest. SB 5353 allows samples of spirits to be mixed with other nonalcoholic products (i.e. mixers, water, or ice). Additionally, distillers may sell their products at a qualifying farmers market, but certain regulations and restrictions apply. Distillers may also obtain a special permit for the purpose of tasting and selling spirits of their own production for events not open to the general public. A significant amendment in Chapter 64.24 broadens the method of sale of distilled spirits, allowing distillers to accept orders (via mail, telephone, or internet) and deliver spirits to their customers if certain regulatory conditions are met. However, a distillery may not utilize a third-party or a contractor to take or process orders. Finally, distillers may offer gift cards or certificates through a third-party retailer for resale to the public.

SB 5504 – Allowing liquor distributor employees to stock liquor under certain circumstances:  Employees at nonretail class liquor licensees (distributors) that are between ages of eighteen and twenty-one may stock and handle liquor merchandise on premises provided that they adhere to certain restrictions.

SB 5596 – Special permit for wine producers:  This bill creates a special permit for wine producers to hold private events for marketing, tasting, and selling their own wine.

SB 5603 – Cottage food operation:  Under Washington law, a “cottage food operation” means a person who produces nonpotentially hazardous baked goods, jams, jellies, preserves, and fruit butters. To qualify for a “cottage food operation” permit certain rules must be met, including maximum annual gross sales. Previously that maximum allowable amount was $15,000, but the new law will increase that to $25,000.

SB 5662 – Brewers and charitable organizations:  This new law allows a licensed domestic brewery or microbrewery to provide promotional items of nominal value to a nonprofit charitable organization qualified under Federal Revenue Code 26 U.S.C. Sec. 501(c)(3).

 

New Laws Relating to Business Regulations:

HB 1078 –Enhancing protection of consumer financial information:  This law applies to any person or business conducting business in Washington state that owns or licenses personal information data. In an event that personal information was not secured and subject of an unauthorized data breach, then the business is required to notify a law enforcement agency (including Attorney General in some instances) and consumers affected by that data breach.

SB 5030 – The New Limited Liability Company Act (the “New LLC Act”):  This highlighted summary is not exhaustive by any means and should not replace independent advice of your legal counsel. This bill will become law on July 25, 2015; however, the changes will not apply to new or existing LLCs until January 1, 2016. The new LLC Act repeals the existing LLC laws (RCW 25.15) with extensive changes providing flexibility and eliminating provisions that create unnecessary problems for business owners and operators. The New LLC Act provides certain default rules that may not be changed or eliminated by an LLC agreement. An LLC agreement may be in writing, oral, or implied; however, certain limitations of powers require written record. Also, an LLC agreement will indicate whether the LLC will be manager-managed or manager-managed. Additionally, each member of a member-managed LLC is presumed the LLC’s agent and has apparent authority to bind the LLC. The fiduciary duties of managers or managing members are clarified and modifications or restrictions of certain duties are allowed in an LLC agreement, subject to certain limits. Default rules for voting and allocation of distributions have also been changed. Further, some LLC actions, such as merger or conversion, require a unanimous vote of members or additional member approval. An LLC must provide its member with records that the members may request subject to reasonable limits on the use of those records.

SB 5031 – Permitting advance action regarding business opportunities:  Generally, directors and officers of a corporation have certain duties to the corporation and its shareholders. Changes to the Business Corporation Act (RCW 23B) allows discretionary provisions in articles of incorporation to limit or eliminate duty of a director, under certain circumstances, to offer a business opportunity to the corporation prior to pursuit of that business opportunity. However, a director must first qualify under certain circumstances.

SB 5032 – Clarifying security interest relating to a lease under Uniform Commercial Code (UCC):  Generally, whether a transaction creates a lease or security interest is determined by the facts in each case (RCW 62.A). Amendment to the existing law further clarifies circumstances which a lease does not create a security interest merely because amount of rental payments may be changed by the lessor upon sale or disposition of an asset (usually it relates to a Terminal Rental Adjustment Clause).

SB 5227 – International commercial arbitration:  A new chapter will be added to the Uniform Arbitration Act (RCW 7.04A) relating to international commercial arbitration. Provisions of this new chapter applies only when parties to an arbitration agreement conduct their business in different countries or parties expressly agree that the subject matter of the arbitration agreement relates to more than one country. The purpose of this new law is to provide uniform terms for arbitration agreements and enforcement process for awards.

SB 5387 – Establishing the Uniform Business Organizations Code (the “UBOC”):  This bill establishes UBOC and will be effective on January 1, 2016. UBOC makes extensive revisions to the existing laws providing uniformity in common provisions governing business organizations and other entity types. The UBOC provides the legal requirements common to all types of entities in one provision (i.e. name reservation). Further, each business entity retains its separate law containing its entity-specific requirements, which will be addressed in that particular act (i.e. New LLC Act).

SB 5826 – Creating Washington state small business retirement marketplace:  This new law will create the Washington small business retirement marketplace program. The goal of the program will be to remove barriers of entry into the retirement market for small businesses (50 or fewer employees) by educating employers on plan availability for low-cost and low-burden retirement savings plans. However, there is no mandatory participation in this program.


Tuesday
Jun022015

Is Your Commercial Lease Structurally Sound?

Commercial and residential leases are not alike. Commercial lease agreements are often lengthy, complex, and contain overwhelming amount of legal terminology and concepts. Entering into a commercial lease agreement is an immense undertaking with considerable financial obligations, so you must understand the terms of your lease. Although the goal of a new start-up or an expanding business is to avoid expenses, such as legal costs, the upfront time and money spent on a thorough legal review of a commercial lease will surely pay for itself in the long run.

Most likely, a lease agreement presented to a business tenant will be initially more for the benefit of the commercial landlord; therefore, it is crucial that you negotiate terms of your lease. Your attorney can lead the negotiations and push back on terms that may seem one sided. Most commercial landlords expect negations on basic economic terms, such as rent, duration, and security deposit.

Additionally, particular provisions of a lease require special attention due to complexity and range of options you may have to protect your interest as a tenant. The following provisions could become problematic if not defined clearly or negotiated:

Operating Expenses: In addition to rent, a tenant may be required to pay a proportionate share of landlord’s operating expenses for the building based on the occupied square footage. Adding restrictions and defining expenses are a few strategies to keep these expenses manageable.

Tenant Improvement Allowance:  Depending on the condition of the property, you may need modification or repairs to meet the needs of your particular business. For example, restaurants require certain layout for equipment installation and ventilation ducts, which may require drastic changes to the property. A landlord may be willing to work with you to help you build the space you need. However, they expect something in return, such as repayment in an event of early termination of that lease. It is essential that the terms of tenant improvement is defined to avoid any confusion down the road.

Duty to Repair:  Commercial lease should be clear on who has the duty to repair damages and to pay for associated costs. Whether a building is a new construction, recently remodeled, or historical, there is always a possibility of defects in construction, electrical, plumbing (to name a few) that may have an adverse impact on your business. Depending on your business needs, you may want to consider a provision that will protect your interest if your business is unable to function.

Exclusive or Non-Compete Clause:  Some leases include an exclusive or a non-compete clause to shield the landlord from loss of business if another competitor opens a similar business within a close distance. Thinking long term about your business plan, you should negotiate a non-compete clause.

Sign and Advertising:  Some commercial leases may restrict displaying business sign or advertisements, so think about your business store front display needs carefully. There may be restrictions on space, size, brightness, or hours that a sign or advertisement can be turned on. It would be a pity for your customers not to find you because you are unable to display your business sign.

Sublease:  Sublease allows a tenant to transfer her or his interest to another party. However, there may be restrictions and fees on sublease terms that need to be evaluated.

The above list is not exhaustive by any means. Each commercial lease is unique depending on the building, location, and type of businesses it supports. A commercial landlord or a manager may rush you to make a quick decision to lock the deal, but take your time to review and understand the lease. A commercial lease is a legal contract that binds your business, so utilize your attorney to uncover seemingly simple terms, negotiate terms to meet your business’ needs, and get the best deal possible for you.

Wednesday
Jan282015

Relaxing Beer Label Requirements: TTB Ruling Relating to Ingredients and Processes Used in the Production of Beer Not Subject to Formula Requirements

Alcohol and Tobacco Tax and Trade Bureau (TTB) publishes various rulings throughout a year stating its official position or interpretation of various regulations and laws. Compliance with ever changing federal and state regulations could be a daunting task, so let’s start off this year by focusing on a recent noteworthy TTB Ruling 2014-4.

On June 5, 2014, TTB issued Ruling 2014-4 to provide relief from formula and regulatory requirements for certain beer products. Pursuant to 27 CFR 25.142 brewers must include certain mandatory information on beer labels. As long as the label includes certain terms, such as “beer,” “ale,” “porter,” or “stout,’” then labeling requirements were met. However, if other ingredients, such as fruits or spices, were added before or during fermentation process, then statements of composition were required by this regulation and brewers had to submit formula disclosures under Federal Certificates of Label Approval process (COLA) to TTB. Additionally, prior to this ruling, brewers were required to get approval for process of aging beer in barrels.

Based on determination that use of certain ingredients and processes in production of beer are considered traditional (see Exempt Ingredients and Processes Determined to be Traditional Under TTB Ruling 2014-4), TTB has ruled that it will no longer require to review individual formulas. However, the product must still meet the definition of beer as a malt beverage, which must contain at least 51 percent of the fermentable material consisting of malt. Further, labels must still clearly identify the base product as “malt beverage,” “beer,” “ale,” “porter,” “stout,” “lager,” or “malt liquor” along with other ingredients informing consumers about fruit, spice, honey or any other ingredients. As far as aging method, TTB now considers aging beer in barrels, including woodchips, a traditional process and not subject to additional formula requirement, as long they are not soaked or infused with distilled spirits or wine to produce beer.

While acceptable labeling designation on aging of beer in barrels may be relaxed, designations that create misleading impressions that emphasize certain words or terms are prohibited. A misleading label would be to imply that beer contains wine or distilled spirits when it was aged in barrels previously used in production or storage of wine or distilled spirits. An example of misleading label would be “bourbon-flavored lager” or “lager with whiskey flavors.” But an example of a proper label for a beer aged in a bourbon or wine barrel would be “bourbon barrel aged ale” or “beer aged in a wine barrel.”

Finally, the new ruling allows listing of an exempt ingredient or category of exempt ingredients. For example, a proper reference to a single ingredient could be “cinnamon ale” or “ale with cherry juice.” An example of a category of ingredients could be “spiced ale” or “fruit ale.”

Although TTB regulations relating to beer label has been somewhat relaxed, labeling requirements and naming conventions still pose problems for many brewers. Avoiding misleading labels on your products is crucial and improper labeling may be a costly lesson.

Tuesday
Nov042014

Closing Your Doors: Protecting Your Interest When Dissolving a Business

Positive energy, creativity, and excitement surround a new business venture. Even though thought of failure is not an option, the fact that majority of startups fail may linger on an entrepreneur’s mind. When that unfortunate time comes upon a business to shut its operation, most business leaders must face the hard facts and start the wind down process. As managers or officers of a failing business, you have a fiduciary duty to preserve interest of owners, members, and shareholders of that business. Taking appropriate business and legal steps to properly dissolve a business is crucial in order to protect interests of its customers, owners, officers, employees, shareholders, and investors. Otherwise, financial ramifications, tax issues, potential claims, and personal liability may haunt those owning or governing the business.

There are myriad of steps to follow in order to wind down your business in a controlled and planned manner, and a great place to start is by reviewing your company’s articles of incorporation and applicable laws. For example, under the Washington Limited Liability Company Act (Act) chapter 25.16 RCW et seq, a limited liability company (LLC) may be dissolved by its members, by decree of judicial dissolution, or by administrative dissolution. However, an administrative dissolution or vote of members to dissolve a LLC does not automatically terminate the existence of that LLC. A dissolved LLC continues to exist for the purpose of winding down and settling its affairs. Further, it does not eliminate remedies available to those harmed by the business, nor does it dismiss actions against that business, its officers, or members for any rights, claims, or liability incurred prior to dissolution or within statutory limit of three years.

An amendment to the Act in 2010 changed the method by which a dissolved LLC can trigger the three-year statute of limitations. The statute now requires a dissolved LLC to file a certificate of dissolution. RCW 25.15.303. This new law created confusion as to tolling of the statute of limitations and prompted the Washington Court of Appeals to rule clarifying that the three-year statute of limitation tolling begins only if a LLC is dissolved by filing certificate of dissolution. Zacks v. Arden Drywall & Texture, Inc., No. 70322-6-I, 2014 WL 3843784 (Wash. Ct. App. Aug. 4, 2014) (unpublished).

Once you notice that your company may be headed for failure and possible shut down, it is critical to take control of the process and work with legal counsel and accountants to address issues. The Act plays a significant role in protecting your business and remaining assets, but it is only one step in the dissolution and wind down process, so keep in mind that skipping any steps could result in a catastrophe. A failed business can take advantage of the benefits of the statute of limitation to cut off claims once the company is dissolved; otherwise, the protection against claims and personal liability will be lost.