PPP Loans: New Guidance on Eligibility Effect of Foreign Affiliates / Extended Deadline for Returning Loans

This email is being sent to all of our clients to point out two new developments that are of critical importance regarding PPP loan applications. As we have pointed out before, borrowers who made false certifications can face criminal and civil consequences.

Eligibility Certifications: Counting Employees of Foreign Affiliates
Late yesterday evening, the SBA added Question 44 to its FAQ, specifying how the number of employees
are counted where an applicant has domestic and/or foreign affiliates:

“For purposes of the PPP’s 500 or fewer size standard, an applicant must count all of
its employees and the employees of U.S. and foreign affiliates, absent a waiver of or
an exception to the affiliation rules.” [Emphasis added]

We suggest that any potential borrower consult us if they have U.S. and/or foreign affiliates whose eligibility might be denied if the number of employees of all affiliates (regardless of their country of residence) exceeds 500.

Necessity Certification: New Safe Harbor Date
Also among yesterday’s updates to the FAQ is an extension for the repayment of loans under the safe harbor, from May 7 to May 14, 2020. On May 4, 2020, we sent out an email update, reminding our clients of SBA guidance from April 23, 2020, that some PPP loan applicants may not be considered to have made their certification in good faith as to the necessity for a PPP loan if they had other sources of liquidity.

In that April 23, 2020 update, the SBA had established a safe harbor that any applicants who applied for a
PPP loan prior to the issuance of that guidance and who repaid the loan in full by May 7, 2020, will be deemed to have made their certification in good faith. Though the deadline has now been extended, the
substantive and strategic considerations to be weighed when determining necessity have not changed.

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About Pavia & Harcourt LLP
Established in 1951, Pavia & Harcourt LLP is a business law firm concentrating in international
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arbitration, intellectual property, estate planning and administration, and matrimonial law. We are
based in New York City.

Contacting Pavia & Harcourt LLP
Questions regarding matters discussed in this publication may be directed to the author, to any other Pavia & Harcourt lawyer with whom you may have consulted previously, or to any of the following members of the litigation department:

Robert D. Tolz
+1 (212) 508-2371
rtolz@pavialaw.com

Nicolo’ Majnoni
+1 (212) 508-2311
nmajnoni@pavialaw.com

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