Articles Posted in Business Transactions

Fotolia_92329578_Subscription_Monthly_M-300x213Despite the fact that everyone is entitled to their day in the court, the reality is that most cases do not make it to trial.  Many clients will approach their lawyers with the hope that they will be able to quickly get in front of a judge and explain their story—a vision of American justice that is reinforced in popular media and Court TV.  However, the reality is that it takes a long time to get to the point when a party can tell its story directly to a Judge.  In most situations, the cases take earlier exit ramps, such as informal out-of-court settlement, non-binding mediation, binding arbitration, or a ruling by the Court before trial.  If a case does make it to trial, the parties often settle on its eve.  Often, the cheapest and most efficient way for a dispute to get resolved is for attorneys to work on an out-of-court settlement.  This can occur at any point either before or after a lawsuit has been filed.  Under this track, attorneys informally negotiate a resolution.  If the parties agree to it, the attorneys will memorialize the resolution in a settlement agreement.  This is often the quickest way to resolve a case, as it does not require any third-party intervention—it only requires parties who are willing to work together to settle their differences and capable counsel to guide the parties through the process.

In addition to out-of-court settlements, cases often get resolved with the help of a third-party neutral.  The decision of this third-party may be binding depending on the posture of each case.  For instance, cases often go to non-binding mediation before they move on to trial.  Indeed, more and more courts are requiring this step before allowing the case to move to trial.  With a non-binding mediation, the parties all present their cases to a neutral, who tries to facilitate a settlement agreement.  In short, non-binding mediation is like the informal out-of-court settlement discussed in the previous paragraph, with the addition of a third-party neutral who helps ease things along. Sometimes, cases may end up in front of a third-party neutral who has the authority to make a binding decision.  For instance, if the parties previously signed an agreement for binding arbitration, the case may end up in front of a private judge whose decision is final.  In other instances, the parties decide to submit their case to binding arbitration at the time of the lawsuit for a variety of reasons, such as cost and efficiency. If the case does actually end up in court, it is still unlikely to reach trial.  The purpose of trial is to get to the truth of what actually happened in a conflict, so if there is no dispute about what actually happened, a judge might rule on the case early based on a dispositive motion like a summary judgment motion.  With a summary judgment motion, the moving party argues that there is no dispute of fact in the case, so the judge has no finding of fact to make in a trial and can proceed to a ruling earlier. If a party brings a summary judgment motion, it has the burden of providing evidence that there is not any dispute of fact in the case.  This evidence may come in a variety of forms, including affidavits, declarations, and discovery responses.  If a judge is persuaded, it may decide to rule on the case right there. As you can see, getting to trial is an involved and lengthy process with the potential for a lot of different early exit ramps.  If a case does make it all the way through the end of trial, it may take a long while to do so.  For instance, a timeline of one year would be a relatively quick timeline in most cases, and it is not uncommon for cases to take several years to make it from beginning to end.

Contact the Experienced California Business Litigation Attorneys at Structure Law Group

Due-Diligence-300x200There are many reasons why thorough due diligence is indispensable to a successful corporate acquisition. Perhaps most importantly, it is a critical step in ensuring that they buyer has a comprehensive picture of what is being acquired. Both legal and financial interests are placed at risk in any business transaction. If thorough due diligence is not performed, a corporation can incur legal liability to its shareholders for losses sustained in the negligent acquisition. It can also lose significant assets, or waste valuable time and money on litigating the failed transaction. An experienced mergers and acquisitions attorney can protect your business by ensuring that all aspects of your due diligence investigation are conducted accurately, thoroughly, and with a broad-reaching projection for all potential contingencies. While it is not a legal requirement for the due diligence process, hiring an experienced Mountain View mergers and acquisitions attorney it is the best way to ensure that your investigations are thoroughly completed and can also protect a corporation from shareholder claims that its due diligence was incomplete or inadequate.

Due Diligence: The Basics

In general, due diligence is the process by which a buyer or seller performs a comprehensive appraisal of a business asset before executing a sales transaction. On the buyer’s end, this thorough investigation will examine the assets and liabilities of the assets to be purchased, as well as forming a picture of their commercial potential. For the seller, a due diligence investigation will focus on the buyer itself. It is vital for the seller to know whether the buyer has the financial means to consummate the deal. If the transaction will give the buyer any rights to management or control of the seller’s business, it is also important for the seller to learn about those processes, and how the seller’s business operations might be affected by the buyer’s exercise of those rights.

Budget-Planning-300x200Starting a new business can be an overwhelming proposition for any Silicon Valley startup business. An experienced business startup attorney can help you build a profitable business from the ground up by finding appropriate financing, effectively forecasting your business expenses and helping you budget effectively.

Finding the Right Financing

The first step to an effective financial plan is putting in place the right startup capital for your particular business. Venture capital is among the most popular financing options for Silicon Valley startups, but it is not right for every business. VC deals often contain onerous terms for profitability, repayment, or reinvestment. Not every business can meet these demands. Accessing venture capital also brings in more stakeholders who have a greater say in the operation of your business. This is the very situation that many startup business owners are looking to avoid.

Stock-Options-300x180
For many Silicon Valley companies, incentive stock options are an important investment strategy for maintaining long-term relationships with employees. It is important to find the investment strategy which is right for your business. The experienced Silicon Valley corporate attorneys at Structure Law Group will help your business identify its employment and investment needs, and access the tools which most efficiently meet these needs.

What Are Your Goals?

The first step in implementing incentive stock options is to consider the specific goals you wish to meet by use of such options. Do you hope to retain employees who might be considering employment elsewhere? Are there specific sales or design goals you need to meet? By identifying the specific problem, employers can determine whether incentive stock options are the appropriate tool to meet their goals.

Fotolia_87806470_Subscription_Monthly_M-300x200
Hedge funds are defined as a limited partnership of investors that use high risk methods to realize large capital gains. Without an applicable exemption, the hedge fund must register with the Securities and Exchange Commission and meet complex, ongoing filing and disclosure requirements. However, depending on investor qualifications, the hedge fund can avoid being defined as an investment company if its participants are either accredited investors or qualified purchasers. Thus. hedge fund managers should consult with an experienced California corporate attorney in order to ensure that their hedge fund practices are in compliance with existing law and regulatory mandates.

The Difference Between an Accredited Investor and a Qualified Purchaser

An accredited investor is an individual who satisfies SEC requirements for income, net worth, asset size, government status, and/or professional experience. In other words, an accredited investor is financially savvy, and because of this , he or she has less need for the protections offered by mandatory regulatory disclosures. Thus, an investment advisor or group working with an accredited investor can be exempt from certain mandatory disclosures. A qualified purchaser is similar to an accredited investor, but requires a higher net worth requirement as defined by the United States Code.

Fotolia_136329992_Subscription_Monthly_M-300x200The sale of a business can be far more complicated than simply signing contracts and transferring assets from one side to the other. Tax and civil liability can be incurred in a traditional sale, anonymity may be required for a host of reasons, and in hostile takeovers, the buyer will need to bypass the seller’s Board of Directors altogether and go directly to the shareholders in order to have the sale approved. Establishing a shell corporation or holding company are two examples of ways to accomplish such goals in a business transaction. A Silicon Valley corporate lawyer can help your business identify its goals and determine which tools best meet its needs in any sales transaction.

What is a Shell Corporation?

As a general matter, a shell corporation can be thought of as a tool for business transactions. As described above, shell corporation can be used to achieve specific goals in connection with business transactions, such as maintaining anonymity, reducing tax liability, or obtaining financing. For example, many startup companies utilize shell corporations in order to store funds during early stages of financing.

Financial-300x225
There are many ways for San Jose technology companies to obtain startup financing and fundraising. One way in which private financing and fundraising can be accomplished is through convertible notes, and may or may not require the involvement of traditional venture capital firms. Convertible notes can allow startup companies to determine the amount of control that their investors will have over the management of their company during the initial startup phase. The experienced San Jose corporate attorneys at Structure Law Group can help your startup explore all financing options to advise on which are best for your business.

A convertible note is a form of short-term debt that converts to equity at a specified point in the future. For startup companies, this is most often accomplished by converting an investor’s initial investment into a given number of shares in the company, at a specified round of financing. The equity does not need to be expressed in shares of common stock, nor does it even have to occur during the first round of financing. The note’s terms and conditions can be negotiated to meet the needs of both the startup company and its investor(s).

Other Negotiable Terms of a Convertible Note

Private-Equity-300x200
The Securities and Exchange Commission has, in recent months, been closely monitoring private equity and venture capital fund managers in order to identify conflicts of interest. The more investments a particular manager oversees, the more potential there is that he or she will encounter a conflict for two (or more) investments. An experienced San Jose corporate attorney can help your business enact practices which will help your fund managers identify and resolve conflicts of interest as early as possible. This will save your business the time and expense of administrative sanctions, SEC hearings, and civil liability – all of which are potential ramifications for any violation of the fiduciary duty of loyalty to act in the best interest of each fund a manager manages.

The Problem Area of Related Transactions

When a venture capital or private equity funds manager engages in transactions closely related to the fund’s investors or portfolio companies, a potential conflict of interest is created. Common examples include co-investment, or when an investor, fund manager, or another one of the manager’s funds has the opportunity to invest in one of the fund’s portfolio companies under terms and conditions which are different from those of the initial investment. Co-investment can also present a problem when a fund manager has an investment opportunity which should be presented to two or more different funds and must determine which fund gets priority at a given time. Fund managers can also face conflicts of interest when divesting a fund of its assets. In such a case, many managers oversee other funds which would benefit from the purchase of the divested assets, but this would create a conflict between the interests of the selling fund (which must maximize the sales price) and the purchasing fund (which must minimize the sales price). When an affiliated transaction arises between a fund manager, its affiliates, the fund, or an individual investment, there is a potential that the fund manager will face a conflict between the interests of the initial fund investment and the affiliated transaction. The affiliated transaction must be carefully assessed for all potential sources of conflict.

California recently surpassed France and Brazil to become the world’s sixth-largest economy. As such, California is home to many businesses with significant assets. In this fast paced, value creating culture, it is not unusual for asset purchase agreements to be completed with pre-printed forms and templates.

Assets-300x169
Unfortunately, many business owners learn the hard way that an asset purchase template fails to address the particulars of the business assets being acquired or sold and provides inadequate protection for the financial and legal interests at stake. An experienced corporate attorney can help protect your company by structuring an asset purchase agreement that is suited to your transaction, enforceable, and able to cover a wide array of contingencies that may arise.

Many Things Can Go Wrong in an Asset Purchase Transaction

There are a variety of ways for a corporation to sell its assets without compromising its structural integrity or otherwise damaging the business.  One common method by which California corporations can sell assets is a stock purchase agreement.  For example, if an investor (which can even be a company) wants to buy stock in a company,

Fotolia_77570998_Subscription_Monthly_M-300x293
the executing instrument is typically a stock purchase agreement.  The stock purchase agreement allows a business to sell its assets – and sometimes, certain voting and management rights – without actually selling the business itself.  In order to protect the assets at issue and protect the legal interests of the companies involved, a California corporate transactional attorney can help businesses effectively negotiate and execute stock purchase agreements.

What is a Stock Purchase Agreement?