In case there is an Equity Transaction, the PPP debtor (or successor entity in cases where a merger) will stay susceptible to all responsibilities beneath the PPP loan if the latest owner(s) usage PPP funds for unauthorized purposes, the SBA may have recourse contrary to the owner(s) for the unauthorized usage.
Additionally, then(1) in the case of a purchase or other transfer of common stock or other ownership interest, the PPP borrower and the new owner(s) are responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements by each PPP borrower, and (2) in the case of a merger, the successor entity is responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements with respect to both PPP loans if any of the new owners or the successor entity arising from an Equity Transaction has a separate PPP loan. Continue reading “PPP Loans and M&A Transactions: brand New Guidance through the SBA”