McBride Law Blog

BLOG

Archive for for August, 2016

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part II)

August 30, 2016

In Cline v. Grelock,[1] the business partners were two lifetime friends who started a towing business called American Asset Recovery, LLC (“AAR”) d/b/a Hound Dog Recovery.  To get the business rolling, Grelock and Cline personally guaranteed a bank loan for AAR to purchase a motor vehicle for the business.  Unfortunately, the business was not very successful—it had substantial debts and did not operate at a profit.  The relationship between the two co-owners also deteriorated to the point where continuing the business was not practicable. … Read the rest

Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part II)

August 25, 2016

Dieckman v. Regency GP LP[1] involved the acquisition of Regency Energy Partners LP (“Regency”) by an affiliated entity in a merger.  Dieckman was a former unitholder of Regency.  Dieckman claimed that Regency’s general partner (“GP”) favored the interests of its affiliates in agreeing to an unfair merger price and, by doing so, breached the limited partnership agreement (“LP agreement”).  Specifically, the LP agreement, which governs GP’s relationship with Regency’s limited partners, provided that whenever GP takes action in its capacity as GP, it must do so in good faith, meaning it “must believe that the determination or other action is in the best interests of the Partnership.”  Interestingly, the LP agreement also contained several “safe harbors” designed to shield GP from claims based on a breach of the LP agreement “or of any duty stated or implied by law or equity” due to conflicts of interest in the following situations:

(i) approval by a majority of the members of the conflicts committee; or

(ii) approval by the vote of a majority of the common units (excluding common units owned by GP and its affiliates).… Read the rest

When Things Fall Apart: Business Partnership, Disagreement, and Dissolution (Part I)

August 23, 2016

Here at The R. Shawn McBride Law Firm, PLLC, we write and speak frequently on business partnership, especially the 4 Ds (death, disability, divorce, and disagreement), which can have a major impact on businesses.  In our previous blog series on business divorce, for example, we talked about why business partners may disagree, describing some instances of conflict that business owners may encounter, and what they can do to protect themselves and the value of their business in the event of a business break-up and the attendant business disruption. … Read the rest

Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part I)

August 18, 2016

In our previous blog series on Comparison of LLC Statutes, we talked about fiduciary duties in the context of a limited liability company (LLC).  Fiduciary duty is a legal duty to act solely in another person’s interests.  It generally encompasses the duty of care (duty to act in good faith and exercise reasonable care in carrying out obligations to the company) and the duty of loyalty (duty to put the best interests of your company above any personal advantages).  We mentioned that some states, including Delaware, Texas, and New York, allow an LLC agreement to expand, restrict, or even eliminate a manager’s or a member’s fiduciary duty within limits.  … Read the rest

Summer Book Reviews

August 16, 2016

This blog post provides the reader with a list of seven books that ought to be on any attorney or business owner’s summer reading list.  The authors of these books are a mix of world-renowned and local business owners, just like you, offering advice and tips that have helped them succeed.  Topics range from legal marketing and workplace issues to how to manage your life’s expectations.  If you enjoy the reviews, we suggest you pick up your own copy and see for yourself. … Read the rest

Maryland Law Update: How a Board Might Exercise Business Judgment When a Shareholder Makes a Demand (Part III)

August 11, 2016

In Oliveira v. Sugarman,[1] the Court of Special Appeals of Maryland said that, in reviewing corporate decisions made by a board of directors, it needs to consider the business judgment rule—a presumption that the board acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the company. The court explained that a shareholder derivative action, like this one, begins with a demand on the board and the board is required to make a decision as to whether to pursue the demanded lawsuit.… Read the rest

When a Business Partner Withdraws: Interpretation of Payout Provisions Under a Partnership Agreement

August 9, 2016

As you know, we write and speak frequently about various issues involving business partnership, including the four Ds (death, disability, divorce, and disagreement).  Although many business owners starting a new venture would like to think that they are somehow immune from the four Ds, the odds are that most, if not all, businesses are bound to experience at least one of them if they are around long enough (really, who can avoid death?).  Disagreement, in particular, can precipitate the withdrawal of one or more business partners at an unexpected time, and when that happens, figuring out the financial aspect of the breakup can be messier than you would want.… Read the rest

Maryland Law Update: How a Board Might Exercise Business Judgment When a Shareholder Makes a Demand (Part II)

August 4, 2016

In Oliveira v. Sugarman,[1] two shareholders of iStar Financial Inc. (“iStar”), a Maryland corporation, sued former and current members of the company’s board of directors and senior management regarding employee compensation plans. In 2009, iStar approved an executive compensation plan to award shares of the company based on stock performance in order to retain key employees and to reduce the company’s tax burden. During the financial crisis, however, iStar became concerned that it did not have enough shares available for the performance-based awards and that key employees might leave for better-paying opportunities.… 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.