McBride Law Blog


Archive for for August, 2015

Maryland Law Update: Minority Shareholder Rights

August 29, 2015

In our previous blog posts on Ritchie v. Rupe,[1] available here and here, we discussed the rights of minority shareholders in a closely held corporation under Texas law.  We explained that, post-Rupe, in Texas, minority owners would have to show abuse of authority with the intent to harm the interests of one or more of the shareholders that creates a serious risk of harm to the corporation in order to show shareholder oppression.[2]  Moreover, a Texas minority shareholder who successfully proves oppression would no longer be entitled to a court-ordered buyout; instead, the sole remedy for oppression would be the appointment of a receiver.… Read the rest

Uber and Lyft Drivers Might Be Employees, Not Independent Contractors, Under California Law

August 27, 2015

Employee or Independent Contractor?

Business owners hire people all the time.  Depending on their status as an employee or independent contractor, however, the law treats them differently, affecting all facets of the relationship, including wages, taxes, etc.  Employers who misclassify workers as independent contracts can end up with substantial tax bills and face penalties for failing to pay employment taxes and for failing to file required tax forms,[1] so it is important that business owners understand the difference between employees and independent contractors.… Read the rest

Other Exemptions Under Regulation D and the Overwhelming Popularity of Rule 506

August 25, 2015

Regulation D, Rule 506

As you can see, the overwhelming popularity of Rule 506 is largely the result of preemption of state securities laws.  In fact, an analysis of Regulation D offerings based on approximately 27,000 Form Ds filed between September 15, 2008 and October 18, 2010 shows that even transactions with smaller offering amounts, for which Rule 504 or Rule 505 were specifically designed, overwhelmingly elected to use Rule 506.[1]

Imagine, for example, a small business that proposes to raise $1 million by offering its securities in three states.… Read the rest

Other Exemptions Under Regulation D and the Overwhelming Popularity of Rule 506

August 22, 2015

Regulation D, Rule 505

Rule 505 of Regulation D provides an exemption for offerings up to $5,000,000 in a 12-month period.[1]  This exemption is not available to investment companies[2] or the so-called “bad actors.”[3]  Just like in Rule 504 offerings, a company cannot use general solicitation or advertising to sell the securities in Rule 505 offerings.[4]  And just like in other Regulation D offerings, Rule 505 securities are restricted securities[5] and issuers need to file Form D with the SEC.… Read the rest

Other Exemptions Under Regulation D and the Overwhelming Popularity of Rule 506

August 15, 2015

An Overview of Exemptions

In our previous posts on exempt offerings and crowdfunding, we discussed some of the most commonly used exemptions from the registration requirements of the federal securities laws, including Regulation A and Rule 506(b) under Regulation D, as well as the new and pending exemptions under the JOBS Act, including Rule 506(c), Regulation A+, and the CROWDFUND Act.  We also mentioned that, while each exemption has its pros and cons, Rule 506 is the exemption used for more than 90 percent of all exempt offerings in the United States.… Read the rest

Update on Eureeca Capital

August 11, 2015

In our previous posts on Eureeca Capital (available here and here), we looked at Eureeca’s ill-fated attempt to operate a crowdfunding platform in the U.S. as a cautionary tale on how not to conduct an exempt offering.[1]  We mentioned that, in anticipation of the institution of the SEC proceedings, Eureeca undertook voluntary remedial actions and submitted an offer of settlement to the agency, including civil penalties of $25,000, which the SEC determined to accept.  We also mentioned that Eureeca’s website now features a prominent disclaimer and information page that provides information about what constitutes “U.S.… Read the rest

Comparison of LLC Statutes

August 10, 2015

Other Considerations

So, now that you have done your research, you decide to form your LLC in Delaware and file the required forms in Delaware.  Is that all you need to do?  It depends on where you actually conduct business.  Most, if not all, states require foreign LLCs (i.e., LLCs formed under the laws of another jurisdiction) to register or apply for authority to do business in that state, if the LLC does business there.  What constitutes “doing business” in a particular state is often debatable, but having a principal place of business or regularly engaging in transactions would most likely count as such, subjecting the entity to the state’s foreign LLC filings, fees, and taxes.… Read the rest

Comparison of LLC Statutes

August 6, 2015

Court System: Who Will Hear My Case?

At times, even with careful planning and drafting, business relationships may turn sour and amicable resolution impossible.  This is where being a Delaware entity might prove to be decisively advantageous.  Delaware houses the nation’s oldest business court, the Delaware Court of Chancery established in 1792.[1]  As a court of equity, it has broad jurisdiction over disputes involving the internal affairs of Delaware business entities and has developed a respected body of case law interpreting Delaware business law.… 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.