Articles Tagged with california law

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Section 544 of the Bankruptcy Code, commonly referred to as the “strong arm” clause, gives the bankruptcy trustee the rights of a secured creditor.  This allows the trustee to avoid for the benefit of the debtor’s creditors transfers or obligations that could have been avoided by an unsecured creditor under nonbankruptcy law, provided such creditor exists.  Generally, this allows the trustee to avoid unperfected liens and fraudulent transfers.

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Section 544 of the Bankruptcy Code sets out the strong arm clause in full.  Section 544 provides in relevant part that “[t]he trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor” that could have been avoided by certain judicial lien holders or bona fide purchasers. The Bankruptcy Code can be confusing and intimidating to some.  An experienced San Jose bankruptcy lawyer can help creditors understand their rights, options and risks not only with the “strong arm” clause, but the entire Bankruptcy Code.

What Claims Can Be Avoided?

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Government contracts can be lucrative for many companies, large or small. Often, one company wants to bid on a government contract but needs assistance from another company to fully perform the contracted work. In such cases, the two companies would combine their resources to share the bid and the contract, if awarded.  When this situation arises, it is critical to ensure that the companies have an agreement, a “teaming agreement”, stating how the work set forth in the government contract is to be divided to protect the interests of each business.

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Many teaming agreements involve a large corporation acting as the primary contractor and one or more smaller businesses acting as subcontractors. Smaller businesses naturally want to protect their interests against larger corporate entities with more resources. Preparing bids can be costly and time consuming and can take focus away from other day to day operations of the business.

Unfortunately, the problem is that many teaming agreements have been deemed unenforceable by California state courts. Because a teaming agreement is signed before a contract is awarded and whether it takes effect is dependent upon winning the contract, many courts have stated that teaming agreements are “an agreement to agree” in the future instead of a binding contract. This means that a subcontractor could take the time to prepare a bid and enter into an agreement with a primary contractor, and once the government contract is won by the primary contractor, it could decide to use a different subcontractor, leaving little legal recourse for the subcontractor.

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Many considerations go into deciding which legal entity to choose when starting a business. In some cases, as the business grows, it may even want to convert into a different entity type. For example, if it began as an LLC and the owner now plans on seeking angel investment, he/she may consider converting to a corporation. In these situations (formations or conversions), one critical factor to consider is meeting the formalities required for different legal entities.

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When a California business is considering converting its entity type, it should not do so without consulting with an experienced California corporate attorney. In addition to filing conversion documents, there are many internal factors that should be considered and discussed before transitioning (the company’s management structure and capitalization structure, as well as any special voting considerations, are only a few examples).

Now, we will look at some of the similarities and the differences in formalities required for limited liability companies (LLCs) and corporations.

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If your business employs at least one person, you should always be aware of the ever-changing wage and hour laws in California and your particular city. In addition, if your company has locations and employees in multiple states or cities, you need to be in compliance with the laws of those jurisdictions, as well. One important aspect of employment law is that many states and cities are raising the required minimum hourly wage. Ignorance of the changes to minimum wage laws is not a valid defense to violating those laws and noncompliance can be costly. Contact the California employment attorneys at Structure Law Group, LLP to stay up-to-date on the latest employment law.  The following is a brief overview of the recent updates to minimum wage in California and increases in other parts of the United States.

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 California Minimum Wage Adjustments

 California has a legislative plan in effect that aims to raise the minimum wage across the state to $15.00 per hour by the start of 2022 for most businesses and by 2023 for smaller businesses. There is one set of guidelines for companies that employ 26 or more individuals and another set for companies with 25 or fewer, so it is important to know which set of guidelines applies to your business.  However, depending on where you conduct your business, a higher minimum wage may apply than what has been enacted by the California legislature, as many cities across the state have increased the minimum wage on their own.  For example, San Francisco raised its minimum wage to $13.64, which will increase to $14.00 per hour on July 1, 2017.  San Jose’s minimum wage is currently $10.50 for all employers and will increase to $12.00 per hour on July 1, 2017.  It is critical to know what the local and state minimum wage is in order to ensure compliance and the employment attorneys at SLG can help.

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When forming a Limited Liability Company (LLC), one must choose who will be responsible for managing the operations of the company. LLCs are managed by either its members or by a manager(s) and are, therefore, either member-managed or manager-managed. Some entrepreneurs know which form they want for their business from the start while other don’t know which would be best and don’t know how to come to the right decision.  Consulting with a knowledgeable Silicon Valley corporate attorney will allow the entrepreneur to understand every avenue for their company and reassures them that their business is moving forward in the right direction.

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Member-managed LLCs

In forming an LLC, the “members” are the owners of the company. In a member-managed LLC, the members of the LLC are actively involved in the running of the LLC’s business. It is the members who handle the day-to-day running of the company and share in the responsibility for management decisions.

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Real estate transactions are complex and often involve valuable property and a significant sum of money. In a real estate transaction, both the buyer and seller of real estate have significant interests on the line they desire to protect; one way of doing this are escape clauses. Since many things can go wrong in a real estate transaction, real estate contracts include many different provisions and clauses that can come into play during the course of the deal or transaction. It is often wise to have an experienced California real estate attorney draft or review any contracts.

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A real estate buyer understandably wants to be aware of the condition and known risks of the property they are purchasing and to ensure the transaction will not unknowingly cost them more money than anticipated in the long run. On the other hand, if a real estate seller enters into a contract with a particular buyer and stops soliciting other buyers, they can lose out on opportunities  if that buyer suddenly backs out of the deal.

To protect buyers while also protecting the interests of sellers, many real estate contracts in California have one or more “escape clauses”. These escape clauses allow the buyer to withdraw from the transaction if certain circumstances arise and the seller has proper notice that the contract is contingent upon these clauses.

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As the owner of a corporation, LLC, or other business, you want employees on your team who improve efficiency and increase profits. However, as cautious as you may be during the hiring process, there is always the chance that an employee may become a problem. In some cases, talking to an employee and discussing an issue can result in them changing their behavior for the better. In other cases, behavior may get worse. You may be getting complaints from your customers, vendors or even other employees. In such cases, it may be best to terminate the employment relationship.

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 Often, the problem is that not many people take getting fired lightly.  While California is an “at-will” employment state, meaning employees can be fired for any legal reason (e.g., non-discriminatory) or no reason at all, many people get angry and look for a reason to hold the business accountable for their job loss, even if it did nothing wrong. For example, if you excuse a male employee for being late regularly yet fire a female employee for tardiness, you may be accused of sex discrimination. Allegations of discrimination, harassment, retaliation, and wrongful termination can be made. Even if such allegations are unfounded, you could have to spend valuable time, energy, and money defending against these claims.

The experienced employment law attorneys at Structure Law Group, LLP can help you establish employment practices and employee handbooks that will allow the employment process to run more smoothly.  The following are some things to consider when firing a problem employee:

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A commercial landlord is confronted with a number of issues when a tenant files bankruptcy. When a tenant files bankruptcy with an unexpired lease, the debtor tenant is given the option to “assume” or “reject” the lease. If the debtor elects to assume the lease, it agrees to be bound by all terms of the lease and it must cure all defaults and provide the landlord with “adequate assurance of future performance” under the lease. If the debtor rejects the lease, the rejection constitutes a breach of the lease, giving the landlord claims for damages.

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Assumption or Rejection. The first question that a commercial landlord will want to know is whether the debtor will assume or reject the unexpired lease.

If the debtor assumes the lease it means that the debtor intends to remain at the property as a tenant (or possible that it plans to assign the lease to a third party). In order for a debtor to assume a lease, the debtor must either not be in default under the lease or it must cure all pre- and post-petition defaults; it must give the landlord “adequate assurance of future performance under the lease,” and it must obtain bankruptcy court approval to assume the lease.

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Previously on this blog, we discussed two important matters relating to the formation of the Terms of Use on your business’s website: avoiding using boilerplate language in favor of terms tailored to your specific business and having a privacy policy regarding the collection of customer information. The following are two more important things to consider during the process of drafting and posting your website’s Terms of Use.

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Have Clear Sale Conditions

Many companies use their website to conduct online sales. No matter what your product is or the size of your operation, failing to have clear conditions of sales on your Terms of Use can result in disputes and even legal claims. The terms of a sale should be in clear language that the customer can read and agree to prior to making a purchase. Some terms to address in this part of your Terms of Use include the following:

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Every time a contract is signed, the potential exists that one party fails to perform the obligations specified under the contract. In such cases, the aggrieved party may elect to file a lawsuit to try to seek performance under the contract or, more typically, for losses incurred as a result of the other party’s non-performance. However, in some cases, there may be a defense to the enforcement of the contract.  One such defense is undue influence.

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Undue influence is the unfair or improper persuasion of one person by another or excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will resulting in inequity. A party’s apparent consent to a contract (or transaction) is not free or real when it is obtained through undue influence. In other words, a contract obtained though undue influence is voidable.  Consent is deemed to have been obtained through undue influence when the purported consent would have been refused if the acts constituting undue influence had not existed.

In California, there are four circumstances, prescribed by the civil code, in which undue influence occurs:

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