In his capacity as a Columnist for California Sports Lawyer®, Founder Jeremy Evans has written a column about the failure of several entertainment and real estate industry banking institutions and changes in legislative tax strategy to increase production business outside California.
You can read the full column below.
With the collapse or pending liquidation of three banking institutions, Silicon Valley Bank, Silvergate Bank, and Signature Bank in California and New York, there has been a run on the market to not only remove cash deposits at banks, but also in crypto currency value. All three banks accepted crypto currency deposits. The Federal Deposit Insurance Corporation (FDIC) guarantees only up to $250,000 coverage for deposits, but has guaranteed that deposits with the Silicon Valley Bank and possibly others will be made fully available as of the writing of this column. Congress also authorized an emergency $10 million for Broadway in New York to keep it doors open and make payroll temporarily. For context, Silicon Valley Bank held $110.36 billion in assets and $88.59 billion in total deposits. Its collapse is the third-largest bank failure in history.
Streaming company Roku, gaming platform Roblox, and video host Vimeo all held accounts with Silicon Valley Bank, but have been assured that their holdings will be protected. It is a reminder to all businesses of the riskiness with the crypto currency strategy as a non-Federal Reserve backed currency. Indeed, athlete and entertainer endorsers are the subject of litigation over their involvement in promoting crypto currency businesses like FTX and the breaking down of the market. The shock to the banking market will assuredly change the strategy of entertainment, media, and sports companies looking to invest and hold funding into multiple banks (likely already the case) and to potentially avoid crypto currency unless backed by the FDIC. According to the federal government, it is an industry ripe for regulation—whether that increases crypto currency investments is to be seen.
In the context of the banking closures, in California, the law provides that corporate officers and directors are generally not liable for corporate debts or responsibilities absent some tortious conduct, malfeasance, omission, or piercing the corporate vail through a corp only acting as a shield of liability and not an actual corporation (e.g., mixed use of funds, joint bank accounts, etc.). See, e.g., Frances T. v. Village Green Owners Ass’n (1986) 42 Cal.3d 490, 503-504. It is also possible that corporate bylaws could differ from the law to expand liability, but likely to be rare. However, California Labor Code Sec. 558.1 provides that directors can be personally liable for wages if the company or an individual director violated labor laws, which includes the practice or closing up businesses for a new business to avoid paying wages. It is uncertain as to whether the facts surrounding the bank closures lead to such tortious behavior, but it is likely that the salaried employees will be paid at least until the termination date of the bank.
Meanwhile, as the State of Georgia has grown into a Hollywood production powerhouse, the Texas legislature is now introducing a tax incentive program to encourage filmmaking in the Lone Star State. The move may mean more entertainment filming projects and other states across the country as they compete for the investment and tax dollars in their respective states. The timing could not be more perfect as NBC/Peacock recently laid out its content strategy, focusing on more development and building a library of series and films content as opposed to being solely focused on subscriber numbers. There could be production opportunities as Hollywood expands its footing and Major League Baseball (MLB) looks to take over regional sports networks with their pending collapse.
Speaking of taking bets, the March Madness Men’s NCAA college basketball tournament is here, and sports betting will reach an all-time high. One quarter of American adults plan to place a bet on the tournament. Lastly, in case one forgot, football, demonstrated by the XFL, is still popular in St. Louis, Missouri. Nothing but conjecture here, but expansion may lead the National Football League (NFL) back to St. Louis depending on the XFL’s success.
About Jeremy M. Evans:
Jeremy M. Evans is the Chief Entrepreneur Officer, Founder & Managing Attorney at California Sports Lawyer®, representing entertainment, media, and sports clients in contractual, intellectual property, and dealmaking matters. Evans is an award-winning attorney and industry leader based in Los Angeles and Newport Beach, California. He can be reached at Jeremy@CSLlegal.com. www.CSLlegal.com.
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