New Startup Visa in the United Kingdom

I would like to share with you a recent article that appeared in TechCrunch about the new visa regulations in the United Kingdom that would allow startup investors to receive visas to start their companies there. This is a brilliant step on the part of the UK to attract top entrepreneur talent to jump start the economy. Does it mean a “brain drain” for the US, where a similar visa is still in Congress? Perhaps not since the two countries are geographically quite remote from each other, however, the other European countries may certainly witness migration of their foreign entrepreneurs to the UK.

I am re-posting the article for your convenience from here

UK beats the US to a tech-friendly Startup Visa by Mike Butcher (March 17, 2011)

“Right now the UK media is making a lot of noise about new Visa rules which mean “super-investors” willing to put £5m into a UK bank account will get the right to stay indefinitely in Britain after only three years. This is two years faster than the average migrant who still has to wait five years. Deposit £10m and the time drops to two years. Clearly the new rules are aimed at high-value investors and entrepreneurs.

However, what the media is missing is the new rules governing entrepreneurs wanting to enter the UK. Now, beginning April 6th, “high-potential” entrepreneurs will be allowed to come to the UK so long as they have £50,000 in funding from a reputable organisation.

That is ridiculously good news for tech startups wanting to set up shop in the UK, and startups in the UK wanting to hire in talent they can’t get locally – CTOs for instance. Plus, entrepreneurs will be allowed to enter the UK with their business partners as long as they have access to joint funds.

These “high-potential” guys will also be allowed to enter the UK on a “visitor visa” in order to secure funding and make arrangements for starting their business before they transfer to a full Tier 1 (Entrepreneur) visa (which is the normal Visa for normal, non- high growth entrepreneurs, who still need £200,000 in funding to qualify).

So a Tier 1 (“Exceptional talent”) applicant will not need to be sponsored by an employer but will need to be endorsed by an “accredited competent body”. Who are these bodies? Well, the list of “competent bodies” will are yet to be announced by the government, but we’re hoping they will include VC, Angels and other investors. But we’re fairly sure this will work out well for tech startups.

The news is very very good for the UK, and will create a huge war for talent in Europe as other countries race to create similarly smart rules.

And in case you were counting, the UK just beat the US to the cherished “startup visa”.

On March 14 this year three powerful US Senators introduced legislation in the Congress which if passed would instantly provide a two-year US visa to any entrepreneur that can obtain an investor to fund his idea. The StartUp Visa Act of 2011 would allow an immigrant entrepreneur to receive a two year visa as long as they can show that a qualified U.S. investor is willing to invest in the immigrant’s venture with a minimum investment of $100,000 or can show that the business has generated at least $100,000 in annual sales from the US.

But that legislation is no where near being passed yet. The UK just beat the US to it.”

Future of Regulation of Investment Advisers Remains Uncertain

There is a lot of talk now in the financial community about the future of regulation of investment advisers. The Securities Exchange Commission, which currently regulates RIAs (registered investment advisers), does not have sufficient funding to effectively conduct such regulation and enforcement. The SEC recently outlined three options to Congress: (i) give FINRA the authority to regulate dually registered firms; (ii) authorize the SEC to impose user fees on advisers to fund examination and enforcement efforts; and/or (iii) designate one or more self-regulatory organizations to oversee investment advisers.

According to a recent InvestmentNews survey of almost 600 advisers, registered representatives, financial planners, insurance agents and others, 78% voted in favor of options (i) and (iii) above, i.e., increasing FINRA’s role in the regulation process. Interestingly, Michael Oxley, a former congressman known for being one of the sponsors of the Sarbanes-Oxley Act of 2002, has recently registered as a lobbyist for FINRA to promote self-regulation of investment advisers. FINRA is currently overseeing 4,560 brokerage firms and may be expanding its authority to investment advisers.

Congress hasn’t yet selected from among the three options presented by the SEC. Stay tuned…

In the meantime, on March 18, 2011, the SEC issued new interpretations to clarify some questions about the new Form ADV requirements for registered investment advisers. See here: http://www.sec.gov/divisions/investment/form-adv-part-2-faq.htm.

Independent Contractors or Employees: California’s “Work For Hire” Contracts

Much has been written (including by me) on the topic of how to distinguish an independent contractor from an employee. I have also written about the importance of “work for hire” or “freelancer” agreements when working with independent contractors to ensure that all intellectual property they create while working on a project is owned by the client rather than the independent contractors themselves.

I recently came across a notable exception to the “work for hire” agreements, and would like to share it with you. It relates to California law, and since I am not licensed there, I urge you to consult with a California-licensed attorney if you think this situation might affect you personally.

In California, if a person enters into a “work for hire” agreement, such person (typically, an independent contractor in New York) is considered to be an employee, and therefore, the employer has to pay appropriate unemployment insurance and workers' compensation. This comes from two local laws, California Unemployment Insurance Code Sections 686 and 621(d) and California Labor Code Section 3351.5(c).

This concept seems to contradict the United States Copyright Act of 1976, which specifically states that the copyright immediately becomes the property of the author who created the work. There are two exceptions. One is if the work is created by an employee within the scope of his or her employment, then the authorship vests in the employer. The other exception is if the work is part of “work made for hire.” This second exception is the one used daily across the United States to allow people hiring freelancers to obtain rights to their work. There are two conditions, though: (1) the work comes within one of the nine categories of works listed in the Act (see my earlier post on this topic) and (2) there is a written agreement between the parties specifying that the work is a work made for hire.

So, in practice, in California, the second exception discussed above just doesn’t work. As soon as you see a “work for hire” agreement, as required by the Copyright Act, the independent contractor becomes an employee. Does it mean that there are NO independent contractors in California? How does everyone deal with a provision like this? One way is, of course, to treat the independent contractors as employees for the purposes of unemployment insurance and workers' compensation. Another way is to omit the “work for hire” language from the independent contractor agreements altogether, and instead include an assignment provision, whereby the independent contractor agrees to assign all intellectual property created as part of the project to the client. A third way is to ask the independent contractor to form an LLC, and then enter into a “work for hire” agreement with that LLC instead of with an individual. LLCs cannot be employees, so the relationship would be that of an independent contractor.

State laws may differ drastically, and this is a good example of why hiring an experienced local lawyer can be important.

This article is not a legal advice, and was written for general informational purposes only.  If you have questions or comments about the article or are interested in learning more about this topic, feel free to contact its author, Arina Shulga.  Ms. Shulga is the founder of Shulga Law Firm, P.C., a New York-based boutique law firm specializing in advising individual and corporate clients on aspects of business, corporate, securities, and intellectual property law.