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Category Archives: Texas Law Update

Covenant Not To Compete When Buying or Selling a Business (Part I)

June 16, 2016

If your business employs skilled workers, or you have been one, you may be familiar with non-compete agreement, also known as covenant not to compete.  For those who are less familiar with the subject, it is a contractual provision under which one party agrees not to compete in the same business, usually for a specific time period and/or in a defined geographic area.  For example, in the context of employment, an employee may sign an employment agreement and agree not to work for a competitor of the employer for, say, three years after termination of the employment. … Read the rest

Can a Partner Be Held Liable for a Partnership Debt in Texas? (Part III)

June 9, 2016

In our previous post, Can a Partner Be Held Liable for a Partnership Debt in Texas?, we discussed the Texas Supreme Court’s holding in American Star Energy and Minerals Corporation v. Stowers[1] that a creditor cannot sue individual partners to satisfy a partnership debt until a judgment is passed against the partnership and goes unsatisfied for 90 days.  There is another part of the story.  The partners argued that the court’s holding imposed “automatic” liability– basically claiming that the court undermined their due process rights on grounds that they should have been named and served in the lawsuit against the partnership so that they would be on notice of their potential liability and have an opportunity to contest it.… Read the rest

Can a Partner Be Held Liable for a Partnership Debt in Texas? (Part II)

June 2, 2016

In American Star Energy and Minerals Corporation v. Stowers,[1] four partners formed a general partnership called S&J Investments (“S&J”) to invest in oil and gas properties.  S&J contracted with  American Star Energy and Minerals Corporation (“American”) to operate these properties.  Subsequently, American sued S&J for breach of contract, which resulted in a final judgment in the amount of $227,884.46 against S&J in 2008.  It turned out that S&J was undercapitalized and unable to satisfy the judgment debt, so in 2010, American brought another action seeking a judgment against the partners individually. … Read the rest

Can a Partner Be Held Liable for a Partnership Debt in Texas? (Part II)

May 26, 2016

In American Star Energy and Minerals Corporation v. Stowers,[1] four partners formed a general partnership called S&J Investments (“S&J”) to invest in oil and gas properties.  S&J contracted with  American Star Energy and Minerals Corporation (“American”) to operate these properties.  Subsequently, American sued S&J for breach of contract, which resulted in a final judgment in the amount of $227,884.46 against S&J in 2008.  It turned out that S&J was undercapitalized and unable to satisfy the judgment debt, so in 2010, American brought another action seeking a judgment against the partners individually. … Read the rest

Can a Partner Be Held Liable for a Partnership Debt in Texas? (Part I)

May 19, 2016

In our previous blog series on general partnership, we talked about what general partnership is and why it is important for business owners to know about it.  We wrote that, despite the advent of limited liability companies (LLCs), business owners frequently form a general partnership, oftentimes without even realizing it.  Generally speaking, partners in a general partnership are jointly and severally liable, and each partner is personally and individually liable for the entire amount of all partnership obligations.  For example, if your partnership owes an amount to a supplier, you, along with the other individual partner(s), would be personally liable if the partnership fails to pay the supplier– whether you intended to be a partner or whether you knew you were exposed to such liability.… Read the rest

LLC Law Update: Piercing the Corporate Veil (Post 4)

February 18, 2016

Texas.

In Texas, veil piercing is in large part governed by the statute.  Specifically, a shareholder is not liable to the corporation or its creditors with respect to, among other things, contractual obligations of the corporation on the basis that the shareholder was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory.[1]  As in Wyoming, a shareholder is also not liable for the corporation’s failure to observe any corporate formality, including the failure to comply with the statute or the certificate of formation or bylaws of the corporation.… Read the rest

An Easy Way for Texas Companies To Raise Money? A Discussion of the Texas Crowdfunding Exemption (Part 5)

January 5, 2016

Texas Crowdfunding Portal Registration and Activities (in Detail).

Simplified/Streamlined Registration Process. The simplified registration process for TCPs, which we discussed previously, is designed so that TCPs are subject to fewer regulatory requirements than general securities dealers, because they are limited in what they can do.[1]

No Investment Advice. Of note, a TCP is prohibited from offering investment advice or recommendations, so in listing issuers on its platform, it is important for the TCP not to provide an implicit endorsement or recommendation.… Read the rest

An Easy Way for Texas Companies To Raise Money? A Discussion of the Texas Crowdfunding Exemption (Part 4)

December 22, 2015

Texas Crowdfunding Portal Registration and Activities.

As we mentioned previously, an offering conducted under the crowdfunding exemption must be made exclusively through an Internet website operated by a registered general dealer or registered TCP.

Local Character. Just like crowdfunding issuers, a TCP must be an entity formed and authorized to do business in Texas.[1]  A TCP should be physically located in and operate exclusively within Texas.[2] Moreover, a TCP must be engaged exclusively in intrastate offers and sales of securities in Texas and limit its activities to operating an Internet website utilized to offer and sell securities under the Texas crowdfunding exemption, without operating or facilitating a secondary market in securities.… 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.