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AdobeStock_392233450-300x200Cryptocurrency has become a critical issue for many California business owners. These new forms of currency can be convenient, but they can also create legal obligations for the businesses that use them. It is important for all business owners to understand the legal implications of cryptocurrency offerings before engaging in any transactions. Some cryptocurrency transactions can fall under the SEC requirements, and business owners can face liability for failing to register their offerings or meeting other legal requirements.

Security Versus Utility

Cryptocurrency can be either a security or a utility, depending on how it is being used. A security is a fungible and negotiable financial instrument with some type of monetary value. When discussing securities, many investors immediately consider stock certificates. This is a classic example of a traditional security. They are not, however, the only item that can be used as a security. Cryptocurrency can also be used as a fungible, negotiable financial instrument, and often these instruments hold significant monetary value.

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AdobeStock_257476584-300x200Litigation is a costly enterprise for any business owner. It is important to work with an experienced business litigator who knows how to mitigate litigation expenses wherever possible. New statutes – such as the one that creates informal discovery conferences – can be used to help resolve discovery disputes and mitigate the over cost of business litigation.

What is an Informal Discovery Conference?

Recently, the California Code of Civil Procedure was amended to allow civil litigants to request an informal discovery conference. While the discovery process is governed by clear rules and procedures, the parties are often expected to resolve differences amongst themselves. If they cannot, they must let the court decide their differences. This is traditionally done by discovery motions. If, for example, one party refused to procedure a document requested by the other, the requesting party could file a motion to compel with the court. The attorneys would then prepare written motions to the court, make arguments at the hearing, and wait for the judge’s ruling. All of this results in added attorney’s’ fees.

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AdobeStock_377846636-300x225Shareholders have important legal rights under California law. These rights protect a shareholder’s ability to make informed financial decisions about their ownership rights in a company. If you do not understand these legal rights, a company can try to get around them and benefit itself at the expense of its own shareholders. The experienced shareholders’ rights attorneys at Structure Law Group can help you protect your legal rights in order to shield your financial interests. Learn more about your shareholder rights – and the limitations placed on these rights.

Statutes

The California Corporations Code provides shareholders with the specific legal right to inspect corporate documents. The statute allows for the inspection of the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board (or a true and accurate copy if the original has been lost, destroyed, or is not normally physically located within the State of California). This inspection can be made with a written demand on the corporation by any shareholder (or holder of a voting trust certificate) at any reasonable time during usual business hours. The statute requires that the demand be made for a purpose reasonably related to the holder’s interests as a shareholder.

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AdobeStock_280928050-300x200As with every new year, 2021 has brought changes to the law that can affect your business. California business owners must stay up to date on the legal changes that can affect their liabilities. The experienced business attorneys at Structure Law Group are here to help you understand all potential liabilities your business could face and develop an effective strategy for mitigating these risks.

New Code of Civil Procedure Statutes Enacted For 2021

The Code of Civil Procedure has been amended to include three new specific sections related to the discovery process. Section 2031.280(a) of the Code of Civil Procedure is amended so that parties responding to an inspection demand may no longer produce documents “as they are kept in the usual course of business.”  Instead, when produced, the documents “shall be identified with the specific request number to which the documents respond.” This can add extensive administrative labor to reorganize documents and produce them as requested.

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AdobeStock_288866301-300x200When real estate is transferred in California, it generally constitutes a change in ownership that triggers a reassessment of the taxable value of that property. There are, however, a few key exclusions that can be used to avoid this trigger and protect your business from added tax liability. If you are considering transferring any property to or from your business, be sure to consult with an attorney about the best way to do this. The investment of attorney’s fees can pay dividends in reduced legal and tax liabilities. Errors, however, can lead to costly reassessments, in addition to tax penalties and interest on the added amount due.

Protecting Property Through the Creation of a Business Entity

There are a few different ways to transfer property to a business entity without triggering a reassessment. One is the legal entity exclusion. This rule allows you to avoid a reassessment if 50 percent or less of the interest in a legal entity is transferred to another legal entity. So if real property is held by a legal entity, up to half of the interest in that legal entity can be transferred without triggering a reassessment. If 51 percent or more of the legal interest is transferred, there will be a reassessment. The strategy is often used by business owners who are creating a new legal entity without changing the ownership of their business.

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AdobeStock_332552950-300x200When a company suffers financial harm due to mismanagement by a corporate officer or a board member, it is the shareholders that usually suffer the consequences. The law allows shareholders to sue for their losses when a company cannot or will not sue the officers that caused it. These are known as “derivative” suits because the shareholder’s cause of action actually derives from the company’s losses. The corporate attorneys at Structure Law Group can help you understand and enforce these rights in order to protect your financial interests as a shareholder. If you believe that funds have been mismanaged, we can help you investigate the claim and plan the legal strategy that best protects your rights. Our experienced litigators can also protect your rights in court.

Suing For Money Mismanagement on Behalf of All Investors of a Fund

When a corporate officer or member of the board engages in mismanagement, the financial consequences often affect all shareholders. Shareholders in this situation will often consolidate their claims into a single case. This saves on both legal expenses and the time it takes to get the case onto a court docket. A single plaintiff will be named to represent the entire “class” of plaintiffs, which in this case is the other shareholders who suffered the same loss. Because the shareholders are actually pursuing the company’s claim, proceeds from the lawsuit can actually go to the company. This is why many shareholder derivative suits seek remedies other than compensation. The shareholders might sue for better accounting practices, or the removal of a board member who engaged in fraudulent transitions, or some other specific relief that will prevent similar losses in the future.

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AdobeStock_343368495-300x200The coronavirus has created many new legal issues with unclear answers. Courts across the country will spend months – and likely years – sorting through a backlog of civil cases involving legal questions about the financial losses created by COVID-19. While it is not possible to predict the outcome in every case, there is some guidance from prior case law that can help business owners effectively plan to mitigate their liability. The experienced business lawyers at Structure Law Group can help develop a mitigation strategy that is tailored to your business. Learn more about the history of breach of contract case law – and how it can help you make informed decisions about your company’s contracts in the era of coronavirus.

Is COVID-19 a Valid Excuse to Breach a Contract?

Case law involving breach of contract goes back hundreds of years. Many different reasons for breach have been explored by the courts, but, of course, they have never before faced COVID-19. This is a new global phenomenon that has created unique challenges for business owners all over the world. To predict how courts will treat breach of contract related to COVID-19, one must examine the reasons they have excused breach in the past – or not excused it, imposing liability on the breaching party.

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AdobeStock_316499043-300x199In California litigation, each side is generally expected to pay their own attorney’s fees. This can be a significant amount – one that is especially hard for businesses to bear when they are new, or small or subject to difficult market conditions (such as the coronavirus pandemics). There are, however, certain situations in which a party can recover attorney’s fees. Learn more about how you can mitigate the expenses of litigation.

Recovery Through Statutes

There are certain statutes that specifically provide for attorney’s fees. If a party successfully pursues a claim under a specific statute, the court can award attorney’s fees at the end of the case. This is why it is important to work with an experienced business litigator who knows which claims you can pursue under state statutes that specifically allow for attorney’s fees. These statutes typically involve cases of serious misconduct, such as fraud, concealing evidence from the other party, or lying to the court. One frequent example is California’s “Anti SLAPP” statute. Section 425.16 of the California Code of Civil Procedure prohibits frivolous lawsuits that use the judicial process to restrict another party’s right to free speech. The statute also specifically allows attorney’s fees to be awarded to a prevailing party on motions to strike filed under this statute.

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AdobeStock_311306025-300x200Many business owners are familiar with the discovery process. When a lawsuit is filed, it triggers a formal process of exchanging evidence between the parties to the case. The discovery process has specific rules governed by law. These rules are designed to protect litigants from opposing parties who would misuse – or blatantly abuse – the discovery process. Unfortunately, if your lawyer is not experienced with the discovery process, your business can be hurt by these strategies. The experienced corporate litigators at Structure Law Group know how to protect litigants from discovery abuse. They are familiar with the tricks and strategies that are used, know how to call out other attorney’s misconduct, and know how to seek sanctions from the court when necessary. Learn more about the tactics for discovery misuse that can hurt your business.

Abuse Can Run Rampant

There are many ways in which an opposing party can abuse the discovery system. One strategy is the “war of attrition.” This can happen when one party is a large business with plenty of funds for litigation, and the other party is a smaller business that has limited resources to pay legal expenses. In this case, an opponent may attempt to drag out the discovery process as long as possible in order to run up the opponent’s legal fees. They might request depositions of unnecessary witnesses, or ask for far more documents than they reasonably need, or insist that documents be organized in a different order or format than how they were originally received. They might file frivolous discovery motions with the court in order to delay discovery and increase your attorney’s fees. All of these requests add up. The discovery process can last for months, so if your attorney is working to manage a lot of frivolous requests, your legal fees can become overwhelming very quickly. In this case, your attorney may need to file a motion with the court to curtail the unnecessary discovery requests – and seek monetary sanctions for misuse of the discovery system.

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AdobeStock_151536590-300x214When filing a lawsuit in California, the original complaint may be either verified or unverified. If it is verified, the plaintiff makes assertions under the pains and penalties of perjury. A verified complaint also forces the defendant to respond to the lawsuit with a verified answer. This tactic forces the defendant to immediately make statements about the allegations under oath. There are strategic reasons to use – and not use – a verified complaint when filing a business lawsuit in California. Learn more about this litigation tactic so you can ask your litigator if it is right for your case.

Pros and Cons

As with anything in life, there are pros and cons to using a verified complaint. As discussed, the most pressing pro is that it forces the defendant to submit a verified answer. These statements can be disproven in litigation – which means your attorney can ask for the defendant to be penalized for lying under oath. You might be awarded attorney’s fees or discovery sanctions for the perjured evidence. At trial, the defendant will be made to look like a witness who is not credible to the jury. By starting your lawsuit with a strong hand, you can have more control over the direction that discovery takes throughout the case.

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