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Tagged Posts: good faith’

When a Corporation Fails To Exist (Legally) (Part IV)

October 27, 2016

In Hill v. County Concrete Co., Inc., Hill and Newman hired an attorney to form a construction services corporation to be known as “C&M Builders, Inc.” (C&M).[1]  The attorney advised Hill and Newman that the corporate name was available and that they could proceed with their business preparations, upon which Hill and Newman ordered checks, painted trucks, and opened a bank account, all imprinted with, or in the name of, C&M.  But for whatever reason, the attorney did not attempt to file the Articles of Incorporation until the end of February 1989, more than 3 months later, and when he did, the corporate name C&M was no longer available. … Read the rest

When a Corporation Fails To Exist (Legally) (Part III)

October 20, 2016

Corporation by Estoppel

In Cranson v. I.B.M. Corp., Cranson decided to invest in a corporation that was soon to be formed.[1] Upon being advised by the attorney that the corporation had been formed, Cranson received a stock certificate for his shares and was shown the corporate seal and minute book.  The company started conducting business, through corporate bank accounts, with auditors maintaining corporate books and records, and under a lease for the office space entered into by the corporation. … Read the rest

When a Corporation Fails To Exist (Legally) (Part II)

October 13, 2016

De Facto Corporation

Cantor v. Sunshine Greenery, Inc., a 1979 case out of New Jersey, is one of the best known cases on the doctrine of de facto corporation.[1]  In that case, Cantor was the landlord and Sunshine Greenery the tenant.  On December 16, 1974, Cantor prepared the lease naming Sunshine Greenery as the tenant, which was signed by Brunetti as president of Sunshine Greenery.  Cantor knew that Brunetti was starting a new corporation but did not request a personal guarantee from Brunetti. … Read the rest

When a Corporation Fails To Exist (Legally) (Part I)

October 6, 2016

We advise and write frequently on personal liability of business owners.  Certain entity forms, such as corporation and limited liability company (LLC), generally offer protection from personal liability for business owners.  Although we discussed in our previous blog series “LLC Law Update: Piercing the Corporate Veil” situations where courts “pierce the corporate (or LLC) veil” to hold business owners liable for business debts, veil piercing is more of an exception than the norm for properly formed and operated entities. … Read the rest

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

September 1, 2016

In Dieckman v. Regency GP LP,[1] the court noted that limited partnerships are governed by their partnership agreements and by Delaware’s limited partnership law.  As the court emphasized, the explicit policy of the law is “to give maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements.”  In other words, in Delaware, as in many other states, courts would generally respect what the partners agree to in a limited partnership agreement, including expansion or restriction of fiduciary duties under the partnership agreement.  … 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

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

New York Law Update: Shareholders’ Inspection Rights

April 5, 2016

In our previous blog series on Shareholders’ Right To Inspect Corporate Books and Records, we discussed under what circumstances shareholders may inspect corporate books and records and what constitutes proper purposes reasonably related to shareholder interests.  For New York law, we looked at Tatko v. Tatko Bros. Slate Co.,[1] which held that a shareholder’s quest to determine the value of his shares was a proper purpose for inspecting the corporation’s financial records, and Ret. Plan for Gen. Employees of the City of North Miami Beach v.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.