DC Metropolitan Business Law Alert - Updates on Important Legal Developments that Impact the Business Community in DC, Md and Va.

Maryland is working hard to actively develop new business and investments in India. Late last year, more than 100 state officials and business leaders, accompanied by Maryland Governor Martin O’Malley, traveled to India for six days to foster new commercial relationships. This, the largest Maryland trade mission to India and the only one headed by a sitting Maryland governor, was primarily self-funded by the participants. O’Malley cites upwards of ten Maryland businesses that signed term sheets or actually entered into joint ventures with India business partners during the trade mission for a touted $60 million in investments to date. The business deals signed ranged from consulting and engineering transactions to biotech and pharmaceuticals and should aid in continuing to fuel increased trade to and from India evident in the Port of Baltimore trade statistics, registering a 49% increase in India trade from 2010. This Maryland initiative comes at an opportune moment in India’s business development as India’s Securities and Exchange Board recently liberalized the Indian securities market regulations to permit certain investors meeting specified requirements (“Qualified Foreign Investors” or “QFIs”) to directly invest in India public companies. While there are still protocols to follow, an individual QFI can now hold up to 5% of the share equity in an Indian company and can sell such shares and receive bonus shares and dividends. For further details on this developing opportunity, see a Client Advisory Note from our affliate Mumbai office, "Qualified Foreign Investors Can Now Invest Directly in Public Companies." Maryland has opened a trade office in India to support its states’ entrepreneurs in utilizing the momentum instigated by the recent trade mission and expects the positive outcome from the mission to continue to develop, aided by the facilitating changes in the Indian equity markets. Kelley Drye & Warren welcomes the opportunity to partner with Maryland business owners to expand their reach into India, take advantage of the more permissive Indian securities regulations and offer our firm’s already well-established ties to India and our colleagues resident there.

Recently, the Virginia Supreme Court issued a decision in Home Paramount Pest Control Companies, Inc. v. Justin Shaffer, et al., Record No. 101837, --- S.E.2d ----, 2011 WL 5248212 (Nov. 4, 2011), that changes Virginia law regarding the enforceability of employee covenants not to compete, or at least formally recognizes changes to the law in this area that have occurred over the past several years. Summed up, Home Paramount is significant because it has established a narrower scope for what such a covenant (commonly known as a "non-compete") can prohibit an employee from doing for a future employer and still remain enforceable under Virginia law. As a general matter, non-competes that are overly broad as to what they prohibit an employee from doing for a future employer risk not being enforceable under Virginia law, if challenged. The Home Paramount decision should be of particular importance to entities that employ persons in Virginia, most notably those entities who have non-competes with their employees or are looking to hire persons who have non-competes with other employers.

Click here to read the Kelley Drye client advisory on the Home Paramount decision for additional details.

By an overwhelming bi-partisan vote, the U.S. Congress passed legislation (H.R. 674) yesterday which repeals a 2005 law that imposes a 3% income tax withholding on government contractor payments in excess of $10,000. The very unpopular withholding provisions were scheduled to become effective at the end of next year. Also, included in the new legislation are tax credits for employers who hire previously unemployed veterans. The tax credits range from $2,400 if the newly-hired veteran was unemployed for at least four weeks, but less than six months, to $5,600 for veterans unemployed for more than six months. Another credit of $9,600 is available for hiring unemployed veterans with service-connected disabilities who were unemployed for at least six months. President Obama is expected to sign the legislation this week or early next week.

Although a company is legally considered enough of a “person” to apply for a loan or enter into another type of contract, an actual human being – usually an officer or partner – has to sign his or her name to the document.  Can that signature cause the company representative to also be personally liable for the company’s obligations?  A Maryland Court of Special Appeals case from earlier this year demonstrates how such a situation may arise.

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On September 20, 2011, the District of Columbia Council agreed to raise the income tax rate on all households in the District earning $350,000 or more per year to 8.95% from 8.5%.  The rate increase shall be effective as of October 1, 2011, the beginning of the District’s 2012 fiscal year.  According to the District’s Office of the Chief Financial Officer, the tax increase affects about 6,000 residents of the District and is projected to increase the District’s tax revenue by $106 million over the next four years.  The Council also approved a measure to eliminate the retroactive application of income tax on interest earned from out of state municipal bonds; opting, instead, to tax the interest earned on out of state municipal bonds beginning with bonds purchased on or after January 1, 2012.