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Archive for for May, 2015

Minority Shareholders Rights, Part 2

May 28, 2015

Post 2

In Ritchie v. Rupe, the minority shareholder was a widow who inherited her husband’s shares in a family business controlled by what she viewed as hostile majority shareholders.  After the parties unsuccessfully sought to redeem her shares through negotiation, the minority shareholder brought a lawsuit alleging oppression, i.e., the majority shareholders’ refusal to meet with prospective purchasers when she tried to sell her shares to third parties.

In a move that surprised lawyers and business community alike, the Texas Supreme Court completely changed the lay of the land in shareholder oppression suits by significantly limiting the scope of the doctrine. … Read the rest

Minority Shareholders Rights

May 26, 2015

Post 1

For nearly three decades, minority shareholders in a closely held corporation in Texas could obtain court-ordered buyouts of their shares as a remedy for oppression by the majority.[1]  To do so, minority shareholders were required to show that the majority’s conduct substantially defeated the reasonable expectations of minority shareholders and was burdensome, harsh, and wrongful conduct.[2]  This was, in part, based on the courts’ recognition of the fact that minority shareholders in close corporations lacked public market for their shares and that buyout was a less drastic measure than, say, receivership for the company’s business.… Read the rest

Crowdfunding: Is It Right For My Business, Post 4

May 21, 2015

Post 4

Intrastate Crowdfunding

With the delay on the federal front, a dozen states have already adopted some form of crowdfunding exemption, which include: Alabama, Georgia, Idaho, Indiana, Kansas, Maine, Maryland, Michigan, Tennessee, Texas, Vermont, Washington, and Wisconsin, as well as the District of Columbia.[1]  Common features of these exemptions include: sales made exclusively within the state, annual offering limits, simplified limits on amounts that may be invested by unaccredited investors, requirements for sales to be made through internet funding portals or registered dealers, escrow of offering proceeds, and disqualification for issuers controlled by persons with criminal or other disciplinary history.… Read the rest

Crowdfunding: Is It Right For My Business, Post 3

May 19, 2015

Post 3

SEC Proposed Rules

One of the most controversial provisions of the Act and the proposed rules concern the audited financial statements requirement.  Specifically, depending on the offering amount, the SEC would require that the issuer’s financial statements be either certified by the issuer’s principal executive officer (< $100,000), reviewed by an independent public accountant ($100,000 – $500,000), or audited by an independent public accountant in accordance with either the AICPA or PCAOB auditing standards (> $500,000).[1]  While the SEC recognizes that many, if not most, issuers engaging in crowdfunding are likely to be early-stage startups, the agency says it does not believe compliance with this requirement would be burdensome for those companies.… Read the rest

Crowdfunding: Is It Right For My Business

May 14, 2015

Post 2

The JOBS Act

The term “crowdfunding” refers to several very different types of funding: donation, pre-purchase, rewards, and investment.  Donor crowdfunding is the solicitation for gifts or donations for personal or charitable causes.[1]  Pre-purchase crowdfunding is the solicitation for pre-production donations or advance purchases in exchange for the produced product or a prototype of the product.[2]  Rewards crowdfunding is the solicitation for contributions to a project, such as a film production where the donors are promised public recognition or a small role in the film.… Read the rest

Crowdfunding: Is It Right For My Business

May 13, 2015

Post 1

Anyone who has started a business knows how difficult it can be to raise money.  Bank loans are difficult to obtain for small businesses and startups, and angel investors are hard to come by.  Sure, family and friends help, but for those who can’t enlist enough of that, access to capital is extremely limited.  Not to mention, even family and friends investments are regulated by securities laws, and if such investments are not documented correctly, future investors may be scared off.… Read the rest

Personal Liability of Business Owners – Post 8

May 7, 2015

Post 8

This will be a multi-post blog entry.  This eighth post discusses administrative issues that may potentially expose business owners to personal liability.

Post 8 – Administrative Issues That Might Lead to Personal Liability for Business Owners

Entrepreneurs as part of start-up Businesses often focus more on business fundamentals e.g. quality product or service delivery, customer satisfaction, marketing and business development, to ensure steady cash flows. Consequently at the initial phase, logistical and administrative issues are low on priority and sometimes even obstructive.… Read the rest

Personal Liability of Business Owners – Post 7

May 5, 2015

Post 7

This will be a multi-post blog entry.  This seventh post discusses the need for certain businesses to comply with securities laws, and consequences of violation or non-compliance thereof.

Post 7 – Violation or Non-compliance of Securities Laws

Some Businesses are family run and owned by a single owner. Most others are operated by multiple owners, some of which, at some point in the future, will likely seek private investments by investors to fund their business expansion plans into diverse markets.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.