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Archive for for September, 2015

Real Estate Securities Fraud Targeting Immigrant Investors (Part 1)

September 29, 2015

If you read our previous blog series on exempt offerings (available here) or attended one of our presentations on raising capital through exempt offerings, you know that the definition of “security” under federal law is extremely broad and includes, among other things, “any note, stock, . . . , certificate of interest or participation in any profit-sharing agreement . . . , or in general, any instrument commonly known as a “security”. . . .”[1]  Interests in certain business entities, such as limited liability companies and limited partnerships, are likely to be securities, so if you have a fractional interest in a piece of real property owned by such entities, for example, chances are that it is a security subject to regulation as security (among other laws).… Read the rest

The Perils of Joint Representation (Part 3)

September 26, 2015

Addressing a Conflict of Interest in a Joint Representation.

If you and your business partner still insist on the services of one lawyer, you would be relieved to know that the existence of a conflict of interest does not necessarily preclude a lawyer from representing more than one client in the same transaction.  But it is something that needs to be addressed proactively in light of all the facts and circumstances.

First, the lawyer needs to determine whether a conflict of interest exists and, if so, whether it can be waived by the clients’ informed consent.  … Read the rest

Can a Shareholder Bring a Lawsuit on Behalf of a Wholly Owned Subsidiary over Board Objections? (Part 3)

September 24, 2015

Double-Derivative Action.

The court next addressed whether Webre, a shareholder of the parent corporation, could bring a derivative suit on behalf of the wholly owned subsidiary.  The court noted that “[i]n a ‘double derivative’ action, the shareholder is effectively maintaining the derivative action on behalf of the subsidiary, based upon the fact that the parent or holding company has derivative rights to the cause of action by the subsidiary.”[1]  Webre argued that his status as a shareholder of USC’s only shareholder provided him with a beneficial or equitable ownership interest in USC.… Read the rest

The Perils of Joint Representation (Part 2)

September 22, 2015

Why Every Client Needs To Have His or Her Own Lawyer.

It may not be readily apparent to most non-lawyers (and even some lawyers), but in every case or matter where a lawyer represents more than one person, there is potential for a conflict of interest, meaning the representation of one client will be directly adverse to another client or there is a significant risk that the representation will be materially limited by the lawyer’s responsibilities to another client.[1]  In everyday terms, this often means that, if a lawyer is working for two clients on the same issue, what is good for one client could be bad for the other client.  … Read the rest

Insider Trading on the Green (Part 2)

September 19, 2015

SEC v. McPhail.

According to the SEC, McPhail’s source of inside information was a member of AMSC’s senior management, who became close friends with McPhail as members of the same country club.[1]  The SEC complaint shows that the two developed a close bond over the years, communicating almost daily and playing golf together, and exchanged intimate and confidential details about their personal and professional lives, relying on each other for support and advice.[2]  Unbeknownst to the AMSC executive, however, McPhail was in for something else.  … Read the rest

Can a Shareholder Bring a Lawsuit on Behalf of a Wholly Owned Subsidiary over Board Objections? (Part 2)

September 17, 2015

Business Judgment Rule.

The court first addressed whether the business judgment rule, which, among other things, protects the board of directors’ decision to pursue or forgo corporate causes of action, applies to closely held corporations so as to bar Webre’s derivative lawsuit.  In Texas, the statute that governed shareholder derivative suits during the relevant time in this case requires a shareholder to first file a written demand with the corporation and wait ninety days before commending a derivative proceeding.[1]  Moreover, under the statute, if the board determines in good faith that such suit is not in the best interests of the corporation and asks the court to dismiss the suit, the court must do so.… Read the rest

The Perils of Joint Representation (Part 1)

September 15, 2015

Are you getting the best advice?  Who is looking out for you and your best interest?  If you are involved in a multi-party business deal, the lawyer involved may or may not be looking out for you and your economic interest.  Read on to learn more.

In our previous blog series on business divorce (available here), we discussed some of the most common situations that lead to a business break-up, including divorce, disability, death, and disagreement, and what business owners can do to protect their businesses in the event of a business breakup.  … Read the rest

Insider Trading on the Green (Part 1)

September 12, 2015

When it comes to securities law violations, people tend to think that the SEC only goes after big fish, but that is plainly not true.  We mentioned in our previous blog series on exempt offerings (available here) that there is no exception for small guys.  We also looked at the SEC’s broken windows enforcement policy (available here and here), under which the agency vows to pursue all types of violations, big and small.  Insider trading, in particular, seems to be an area where seemingly ordinary people get caught often, after mistakenly believing that their small-scale violations and private (sometimes coded) communications would go unnoticed. … 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.