The LLC now leads as the most popular statutory business entity in the United States. If you manage business formations and compliance, chances are you’re looking at a lot of LLCs. But with only 30 years of LLC law — compared to 100+ years of corporation law — you can also be facing some uncertainty.
Whether you’re managing just a few LLCs or many, accuracy is essential. Learn the basics of LLC law from CT’s expert staff attorneys. With a solid grounding in current LLC state laws, you can confidently make better-informed decisions for forming, qualifying, and maintaining LLCs.
Forum for Financial Institution Directors: How Do Directors Prepare for the W...Winston & Strawn LLP
This presentation focuses on bringing information of great importance to Directors. The Forum brings together board directors, legal advisors, and regulators to discuss challenges that face directors in this industry, share best practices on regulatory compliance, risk and audit committee priorities, proxy issues, the changing face of director liabilities, avoiding enforcement actions against directors, and directors and officers insurance considerations.
This panel included Robb Adkins, chair of the firm’s white collar, regulatory defense, and investigations practice, Scott DeVries, chair of the insurance recovery practice, and Jim Smith, chair of the firm’s securities class action defense group. Christine Edwards moderated the panel. Topics presented in a discussion format included:
What are trends in securities class action cases and how can Directors address the risks they present?
When criminal allegations are involved, how should Directors address those cases differently?
Should Directors and Officers liability insurance discussions be different this year and include the entire board?
The document discusses the legal theory of "deepening insolvency" which allows creditors to sue a company's officers and directors when their actions prolong the insolvency and increase debt. It summarizes a recent court case, In re Lemington Home for the Aged, where the Third Circuit Court of Appeals recognized "deepening insolvency" as a valid legal claim under Pennsylvania law. The court found that the officers and directors of Lemington Home failed to act with reasonable care and diligence, deepening the insolvency, and allowed the creditors' claims against them to proceed to trial. The ruling provides an opportunity for creditors to recover from officers and directors when their actions expand debt and prolong the insolvency
In the past two decades, the legal profession has expended great effort to define and refine the principles governing the ethical conduct of attorneys and judges. Sanctions for an attorney violating ethics rules can be private (letter of warning, private reprimand, admonition) or public (public reprimand, probation, suspension, disbarment). More than any other profession, the legal profession has embarked on a campaign to identify and police unethical conduct and fulfill its primary duty of serving the public and the legal system.
This short information session will cover the fundamentals of legal ethics.
What advantages and disadvantages are there to illinois s corporations and ll...www.growthlaw.com
S corporations and LLCs with S corporation elections provide similar liability protection and federal tax treatment, passing income through to owners. However, S corporations pay annual franchise taxes that LLCs are not subject to. Both entity types allow for distributions to owners to avoid self-employment taxes. An LLC can also elect partnership tax treatment to defer taxes until cost basis is exceeded and allow tax allocations between partners. Due diligence for mergers examines ownership verification, and the acquisition may provide an opportunity to change the entity type for future tax advantages.
Where does a judge find the rules? The judicial imagination is not sufficient authority, even though some judicial decisions seem to suggest otherwise. There are several sources of the law, the primary ones being the Constitution, legislation, and prior judicial decisions. This last is the subject matter of this session.
WorldCom engaged in fraudulent accounting practices that inflated revenues and hid expenses, which ultimately led to its bankruptcy. Top executives pressured employees to manipulate financial reports in order to meet expectations. When the fraud was uncovered, it resulted in massive job losses, the loss of $180 billion in shareholder value, and damage to the telecom industry. The fraudulent culture was driven by autocratic leadership, lack of transparency, and failure of oversight by the board and auditors.
Avoiding Elder Abuse by a Rogue Power of AttorneyBC Notaries
A comprehensive look at all the things to consider when setting up a Power of Attorney to hopefully avoid any misuse or abuse by an "Attorney" going rogue.
This document discusses a proposed city charter for Costa Mesa, California that would replace state general laws for municipal affairs. It addresses how the charter may affect issues like land use and parks, elections, resident rights, fiscal impacts, public contracting, and pension liabilities. Concerns are raised that a poorly written charter could enable abuses of power by the city council and reduce citizen protections. Proponents argue the charter is needed to address the city's pension debt, but opponents believe it concentrates too much power without sufficient checks and balances.
Forum for Financial Institution Directors: How Do Directors Prepare for the W...Winston & Strawn LLP
This presentation focuses on bringing information of great importance to Directors. The Forum brings together board directors, legal advisors, and regulators to discuss challenges that face directors in this industry, share best practices on regulatory compliance, risk and audit committee priorities, proxy issues, the changing face of director liabilities, avoiding enforcement actions against directors, and directors and officers insurance considerations.
This panel included Robb Adkins, chair of the firm’s white collar, regulatory defense, and investigations practice, Scott DeVries, chair of the insurance recovery practice, and Jim Smith, chair of the firm’s securities class action defense group. Christine Edwards moderated the panel. Topics presented in a discussion format included:
What are trends in securities class action cases and how can Directors address the risks they present?
When criminal allegations are involved, how should Directors address those cases differently?
Should Directors and Officers liability insurance discussions be different this year and include the entire board?
The document discusses the legal theory of "deepening insolvency" which allows creditors to sue a company's officers and directors when their actions prolong the insolvency and increase debt. It summarizes a recent court case, In re Lemington Home for the Aged, where the Third Circuit Court of Appeals recognized "deepening insolvency" as a valid legal claim under Pennsylvania law. The court found that the officers and directors of Lemington Home failed to act with reasonable care and diligence, deepening the insolvency, and allowed the creditors' claims against them to proceed to trial. The ruling provides an opportunity for creditors to recover from officers and directors when their actions expand debt and prolong the insolvency
In the past two decades, the legal profession has expended great effort to define and refine the principles governing the ethical conduct of attorneys and judges. Sanctions for an attorney violating ethics rules can be private (letter of warning, private reprimand, admonition) or public (public reprimand, probation, suspension, disbarment). More than any other profession, the legal profession has embarked on a campaign to identify and police unethical conduct and fulfill its primary duty of serving the public and the legal system.
This short information session will cover the fundamentals of legal ethics.
What advantages and disadvantages are there to illinois s corporations and ll...www.growthlaw.com
S corporations and LLCs with S corporation elections provide similar liability protection and federal tax treatment, passing income through to owners. However, S corporations pay annual franchise taxes that LLCs are not subject to. Both entity types allow for distributions to owners to avoid self-employment taxes. An LLC can also elect partnership tax treatment to defer taxes until cost basis is exceeded and allow tax allocations between partners. Due diligence for mergers examines ownership verification, and the acquisition may provide an opportunity to change the entity type for future tax advantages.
Where does a judge find the rules? The judicial imagination is not sufficient authority, even though some judicial decisions seem to suggest otherwise. There are several sources of the law, the primary ones being the Constitution, legislation, and prior judicial decisions. This last is the subject matter of this session.
WorldCom engaged in fraudulent accounting practices that inflated revenues and hid expenses, which ultimately led to its bankruptcy. Top executives pressured employees to manipulate financial reports in order to meet expectations. When the fraud was uncovered, it resulted in massive job losses, the loss of $180 billion in shareholder value, and damage to the telecom industry. The fraudulent culture was driven by autocratic leadership, lack of transparency, and failure of oversight by the board and auditors.
Avoiding Elder Abuse by a Rogue Power of AttorneyBC Notaries
A comprehensive look at all the things to consider when setting up a Power of Attorney to hopefully avoid any misuse or abuse by an "Attorney" going rogue.
This document discusses a proposed city charter for Costa Mesa, California that would replace state general laws for municipal affairs. It addresses how the charter may affect issues like land use and parks, elections, resident rights, fiscal impacts, public contracting, and pension liabilities. Concerns are raised that a poorly written charter could enable abuses of power by the city council and reduce citizen protections. Proponents argue the charter is needed to address the city's pension debt, but opponents believe it concentrates too much power without sufficient checks and balances.
In this tutorial, Chris Roush helps you become better acquainted with the inner-workings of bankruptcy court and shows you best practices for identifying stories in documents.
Roush is the director of the Carolina Business News Initiative and an associate professor at the University of North Carolina at Chapel Hill.
WorldCom was a telecommunications company that grew rapidly through acquisitions but suffered the largest accounting fraud in U.S. history. The CEO dominated decision-making and many board members had conflicts of interest as both directors and shareholders. Weak internal controls and lack of independent oversight allowed the fraud to occur, inflating revenues by $11 billion. Reforms were needed to strengthen auditing, install truly independent boards, and implement strong ethical standards and internal controls to prevent future scandals.
Here are some ways the WorldCom board could have improved its corporate governance:
- Been more independent from management and exercised stronger oversight of financial reporting. The board appeared to rubber stamp whatever the CEO wanted.
- Had audit committees comprised solely of independent directors to oversee the financial auditing process. WorldCom's audit committee included non-independent directors.
- Rotated auditing firms more frequently to reduce coziness between auditors and management. WorldCom kept Andersen on for years.
- Established stricter controls over financial reporting to prevent the massive accounting fraud that occurred. No meaningful controls were in place.
- Terminated the CEO once massive accounting problems came to light instead of allowing him to
There are majorly two issues that are faced when starting up any business: these are the legal structure and the rights of intellectual property of the business.
Reference: http://www.researchomatic.com/Legal-Structure-Of-Business-151187.html
The WorldCom scandal was a major accounting scandal that came to light in the summer of 2002 at WorldCom, the USA's second-largest long-distance telephone company at the time.
Compendio sistematizado de regulaciones USA relevantes en materia de fraude corporativo, corrupción, compliance y eventual riesgo penal internacional (también, en varias de ellas, para empresas chilenas, o sus dueños y ejecutivos)
When advising business clients about doing business in Canada, lawyers must turn their minds not only to the kinds of corporate vehicles which Canadian law permits but also the remedies permitted if disputes arise. In this paper, we highlight the range of remedies available in the common law jurisdictions of Canada to protect shareholders and others from abusive corporate action.
This is the fourth update revision of a paper which was first published on the internet in 2005. It has been widely read and has been well-received by clients and other lawyers. We believe that we have been repeatedly quoted by other lawyers. Our paper was used in global corporate law texts in Asia and was including in required reading for a business valuators program in Canada.
This paper begins by discussing the various sources of shareholder rights, including corporate statutes, articles of incorporation and by-laws, and shareholder agreements. Although securities laws will also be briefly mentioned, the securities regime is exceedingly complex and it is beyond the scope of this paper to address it in detail. We then discuss the remedies provided by corporate statute to shareholders who are aggrieved by the manner in which management conducts the business and affairs of the corporation, including voting, court-ordered meetings, derivative actions, the oppression remedy, investigations, appraisals and court-ordered winding-up on the “just and equitable principle”.
The oppression remedy, widely acknowledged to be the most powerful weapon in the shareholder's arsenal of remedies, focusses on two particular points: the broad definition of "complainant" under corporate statutes, and the manner in which the courts have defined the reasonable and legitimate expectations of shareholders and other "proper persons" under the oppression remedy.
The authors are members of ELLYN LAW LLP Canadian Business Litigation & Arbitration Lawyers, a Toronto law firm, specializing in dispute resolution for small and medium businesses and their shareholders. The firm is a member of the International Network of Boutique Law Firms (www.inblf.com), a prestige network of specialized law firms who have demonstrated pre-eminence their practice fields. Ellyn Law LLP is INBLF’s designated Toronto firm for shareholder disputes and arbitration. Igor Ellyn, QC is the Chair of INBLF's Business Litigation & Arbitration Practice Group.
In the seven years since this paper was first published, ELLYN LAW LLP has acted on dozens of complex shareholder disputes. Despite our long experience in this area, each case brings its shares of new twists and surprises. In each revision of this paper, we have added the benefits of our added experiences.
This document provides an agenda and summary of updates related to state and local tax laws. It discusses changes and developments in Oregon, California, Washington, Texas, and national state tax trends. Specific topics covered include changes to Oregon's corporate tax rates, personal exemption credits, IC-DISC tax regime, and new legislation on small business taxation. California updates include changes to its enterprise zone program and new partial sales tax exemptions for manufacturing and R&D.
WorldCom began as a small Mississippi company and grew rapidly through acquisitions, becoming the second largest telecommunications provider in the US. However, in 2002 it filed for the largest bankruptcy in US history due to $11 billion in accounting fraud over 3 years. WorldCom fraudulently capitalized operating expenses to inflate revenue and profits. After numerous mergers, management struggled to integrate the companies and concealed this from investors. Weak board oversight and a desire to meet numbers allowed the fraud to occur until WorldCom collapsed under $41 billion of debt.
“‘Broken Window’ Filings: How to Avoid SEC Section 16 Problems for Officers, Directors and Public Companies,” is an installment of The Real Deal.
In a novel mass enforcement action, the SEC recently announced heavy fines against 34 individuals and companies for violating stock transaction and ownership reporting rules. The SEC emphasized that it now is using sophisticated computer algorithms to find and prosecute even inadvertent violations. With this initiative, there is more reason than ever for compliance officers, in-house counsel, directors and officers to ensure they are doing all they can to stay out of the cross-hairs of future enforcement actions.
This presentation was held on October 23, 2014 at 12:00-1:30 p.m. (Central). This webinar series addresses current trends, challenges, and legal topics pertinent to M&A and securities professionals.
This document summarizes the rise and fall of WorldCom and analyzes the root causes of the corporate fraud that led to its bankruptcy. It describes WorldCom's hyper-focus on increasing shareholder value and results at all costs, which fostered a culture where employees felt like passive victims who had no choice but to follow orders from executives. This created an environment where massive accounting fraud could take place. The document argues that ethics training and compliance programs are insufficient to change a culture, and that true reform requires fostering autonomy, free will, transparency and meaning in work at all levels of the organization.
Over the last few years we have seen some significant adjustments and developments in Revised Article Nine. Starting with 2013 statutory changes and now recent court cases have created a new environment that due diligence experts must adjust to in order to maintain their high levels. This one hour seminar explores some of these changes and how they impact the due diligence work flow and the relationships between the interested parties.
Freddie Mac and several executives were charged with civil fraud for misstating earnings by $5 billion through negligent conduct. The company was fined $50 million and executives received fines from $29,227 to $250,000. The accounting fraud brought new regulations, hurt investor trust, and contributed to the housing market crash by making the company's financials unclear.
WorldCom was a telecommunications company founded in 1983 that grew through acquisitions in the 1990s. It was led by CEO Bernie Ebbers from 1985 until 2002. In 2002, WorldCom revealed it had committed accounting fraud by improperly capitalizing line costs and inflating revenue, totaling over $3.8 billion. This led to the bankruptcy of WorldCom and prosecution of its executives. An internal audit by Cynthia Cooper uncovered the fraud. Recommendations for preventing future fraud include ensuring independent audits, establishing ethical policies, and passing laws like Sarbanes-Oxley to improve accountability.
The document discusses accounting fraud at Worldcom and how various factors contributed to its problems. The telecommunications industry changes and aggressive acquisitions led by CEO Ebbers put pressure on Worldcom to continually grow. Ebbers disregarded ethics and rules, and encouraged a culture with no accountability. CFO Sullivan inappropriately released liabilities and treated network capacity as assets to falsify financial reports. Improved oversight of leadership, stronger reporting procedures, and accounting controls could have prevented the fraud.
WorldCom began as a small long distance telephone provider and grew through acquisitions to become a large telecommunications company. However, in 2000-2002 fraudulent accounting practices were uncovered that inflated reported profits by $3.8 billion through improperly capitalizing regular operating costs. This led to WorldCom filing for the largest bankruptcy in US history at the time in 2002. Key executives were later charged and convicted for their role in the fraud scheme.
Sidoti & Company Spring 2017 Convention PresentationJim Jenkins
This document summarizes the potential impact of the Trump administration on securities regulation based on a presentation by the law firm Harter Secrest & Emery LLP. It outlines changes to SEC leadership and budget under Trump that indicate less enforcement. It also discusses efforts to repeal parts of Dodd-Frank and roll back regulations like those around conflict minerals and resource extraction payments. Overall the future of post-2008 financial crisis rules is uncertain but deregulation is a key focus.
Law is a powerful and important social force that affects most aspects of life. There are several classifications and sources of law that help explain its complex nature. Law can be classified as public or private, civil or criminal, substantive or procedural, common law or statutory law. The main sources of law include constitutional law, treaties, administrative law, statutory law, case law, federal law, and state law. Understanding these classifications and sources is helpful for examining how law shapes social life.
The document provides an overview of the rise and fall of WorldCom, a major telecommunications company that collapsed in 2002 due to accounting fraud. It discusses WorldCom's growth through acquisitions in the 1990s, the accounting investigation that revealed $3.8 billion in fraud, and the resulting bankruptcy. It then outlines recommendations to prevent future fraud, including strengthening corporate governance through independent boards and audits, implementing whistleblower policies, and securing financial reporting through controls and periodic reconciliations.
CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
In this tutorial, Chris Roush helps you become better acquainted with the inner-workings of bankruptcy court and shows you best practices for identifying stories in documents.
Roush is the director of the Carolina Business News Initiative and an associate professor at the University of North Carolina at Chapel Hill.
WorldCom was a telecommunications company that grew rapidly through acquisitions but suffered the largest accounting fraud in U.S. history. The CEO dominated decision-making and many board members had conflicts of interest as both directors and shareholders. Weak internal controls and lack of independent oversight allowed the fraud to occur, inflating revenues by $11 billion. Reforms were needed to strengthen auditing, install truly independent boards, and implement strong ethical standards and internal controls to prevent future scandals.
Here are some ways the WorldCom board could have improved its corporate governance:
- Been more independent from management and exercised stronger oversight of financial reporting. The board appeared to rubber stamp whatever the CEO wanted.
- Had audit committees comprised solely of independent directors to oversee the financial auditing process. WorldCom's audit committee included non-independent directors.
- Rotated auditing firms more frequently to reduce coziness between auditors and management. WorldCom kept Andersen on for years.
- Established stricter controls over financial reporting to prevent the massive accounting fraud that occurred. No meaningful controls were in place.
- Terminated the CEO once massive accounting problems came to light instead of allowing him to
There are majorly two issues that are faced when starting up any business: these are the legal structure and the rights of intellectual property of the business.
Reference: http://www.researchomatic.com/Legal-Structure-Of-Business-151187.html
The WorldCom scandal was a major accounting scandal that came to light in the summer of 2002 at WorldCom, the USA's second-largest long-distance telephone company at the time.
Compendio sistematizado de regulaciones USA relevantes en materia de fraude corporativo, corrupción, compliance y eventual riesgo penal internacional (también, en varias de ellas, para empresas chilenas, o sus dueños y ejecutivos)
When advising business clients about doing business in Canada, lawyers must turn their minds not only to the kinds of corporate vehicles which Canadian law permits but also the remedies permitted if disputes arise. In this paper, we highlight the range of remedies available in the common law jurisdictions of Canada to protect shareholders and others from abusive corporate action.
This is the fourth update revision of a paper which was first published on the internet in 2005. It has been widely read and has been well-received by clients and other lawyers. We believe that we have been repeatedly quoted by other lawyers. Our paper was used in global corporate law texts in Asia and was including in required reading for a business valuators program in Canada.
This paper begins by discussing the various sources of shareholder rights, including corporate statutes, articles of incorporation and by-laws, and shareholder agreements. Although securities laws will also be briefly mentioned, the securities regime is exceedingly complex and it is beyond the scope of this paper to address it in detail. We then discuss the remedies provided by corporate statute to shareholders who are aggrieved by the manner in which management conducts the business and affairs of the corporation, including voting, court-ordered meetings, derivative actions, the oppression remedy, investigations, appraisals and court-ordered winding-up on the “just and equitable principle”.
The oppression remedy, widely acknowledged to be the most powerful weapon in the shareholder's arsenal of remedies, focusses on two particular points: the broad definition of "complainant" under corporate statutes, and the manner in which the courts have defined the reasonable and legitimate expectations of shareholders and other "proper persons" under the oppression remedy.
The authors are members of ELLYN LAW LLP Canadian Business Litigation & Arbitration Lawyers, a Toronto law firm, specializing in dispute resolution for small and medium businesses and their shareholders. The firm is a member of the International Network of Boutique Law Firms (www.inblf.com), a prestige network of specialized law firms who have demonstrated pre-eminence their practice fields. Ellyn Law LLP is INBLF’s designated Toronto firm for shareholder disputes and arbitration. Igor Ellyn, QC is the Chair of INBLF's Business Litigation & Arbitration Practice Group.
In the seven years since this paper was first published, ELLYN LAW LLP has acted on dozens of complex shareholder disputes. Despite our long experience in this area, each case brings its shares of new twists and surprises. In each revision of this paper, we have added the benefits of our added experiences.
This document provides an agenda and summary of updates related to state and local tax laws. It discusses changes and developments in Oregon, California, Washington, Texas, and national state tax trends. Specific topics covered include changes to Oregon's corporate tax rates, personal exemption credits, IC-DISC tax regime, and new legislation on small business taxation. California updates include changes to its enterprise zone program and new partial sales tax exemptions for manufacturing and R&D.
WorldCom began as a small Mississippi company and grew rapidly through acquisitions, becoming the second largest telecommunications provider in the US. However, in 2002 it filed for the largest bankruptcy in US history due to $11 billion in accounting fraud over 3 years. WorldCom fraudulently capitalized operating expenses to inflate revenue and profits. After numerous mergers, management struggled to integrate the companies and concealed this from investors. Weak board oversight and a desire to meet numbers allowed the fraud to occur until WorldCom collapsed under $41 billion of debt.
“‘Broken Window’ Filings: How to Avoid SEC Section 16 Problems for Officers, Directors and Public Companies,” is an installment of The Real Deal.
In a novel mass enforcement action, the SEC recently announced heavy fines against 34 individuals and companies for violating stock transaction and ownership reporting rules. The SEC emphasized that it now is using sophisticated computer algorithms to find and prosecute even inadvertent violations. With this initiative, there is more reason than ever for compliance officers, in-house counsel, directors and officers to ensure they are doing all they can to stay out of the cross-hairs of future enforcement actions.
This presentation was held on October 23, 2014 at 12:00-1:30 p.m. (Central). This webinar series addresses current trends, challenges, and legal topics pertinent to M&A and securities professionals.
This document summarizes the rise and fall of WorldCom and analyzes the root causes of the corporate fraud that led to its bankruptcy. It describes WorldCom's hyper-focus on increasing shareholder value and results at all costs, which fostered a culture where employees felt like passive victims who had no choice but to follow orders from executives. This created an environment where massive accounting fraud could take place. The document argues that ethics training and compliance programs are insufficient to change a culture, and that true reform requires fostering autonomy, free will, transparency and meaning in work at all levels of the organization.
Over the last few years we have seen some significant adjustments and developments in Revised Article Nine. Starting with 2013 statutory changes and now recent court cases have created a new environment that due diligence experts must adjust to in order to maintain their high levels. This one hour seminar explores some of these changes and how they impact the due diligence work flow and the relationships between the interested parties.
Freddie Mac and several executives were charged with civil fraud for misstating earnings by $5 billion through negligent conduct. The company was fined $50 million and executives received fines from $29,227 to $250,000. The accounting fraud brought new regulations, hurt investor trust, and contributed to the housing market crash by making the company's financials unclear.
WorldCom was a telecommunications company founded in 1983 that grew through acquisitions in the 1990s. It was led by CEO Bernie Ebbers from 1985 until 2002. In 2002, WorldCom revealed it had committed accounting fraud by improperly capitalizing line costs and inflating revenue, totaling over $3.8 billion. This led to the bankruptcy of WorldCom and prosecution of its executives. An internal audit by Cynthia Cooper uncovered the fraud. Recommendations for preventing future fraud include ensuring independent audits, establishing ethical policies, and passing laws like Sarbanes-Oxley to improve accountability.
The document discusses accounting fraud at Worldcom and how various factors contributed to its problems. The telecommunications industry changes and aggressive acquisitions led by CEO Ebbers put pressure on Worldcom to continually grow. Ebbers disregarded ethics and rules, and encouraged a culture with no accountability. CFO Sullivan inappropriately released liabilities and treated network capacity as assets to falsify financial reports. Improved oversight of leadership, stronger reporting procedures, and accounting controls could have prevented the fraud.
WorldCom began as a small long distance telephone provider and grew through acquisitions to become a large telecommunications company. However, in 2000-2002 fraudulent accounting practices were uncovered that inflated reported profits by $3.8 billion through improperly capitalizing regular operating costs. This led to WorldCom filing for the largest bankruptcy in US history at the time in 2002. Key executives were later charged and convicted for their role in the fraud scheme.
Sidoti & Company Spring 2017 Convention PresentationJim Jenkins
This document summarizes the potential impact of the Trump administration on securities regulation based on a presentation by the law firm Harter Secrest & Emery LLP. It outlines changes to SEC leadership and budget under Trump that indicate less enforcement. It also discusses efforts to repeal parts of Dodd-Frank and roll back regulations like those around conflict minerals and resource extraction payments. Overall the future of post-2008 financial crisis rules is uncertain but deregulation is a key focus.
Law is a powerful and important social force that affects most aspects of life. There are several classifications and sources of law that help explain its complex nature. Law can be classified as public or private, civil or criminal, substantive or procedural, common law or statutory law. The main sources of law include constitutional law, treaties, administrative law, statutory law, case law, federal law, and state law. Understanding these classifications and sources is helpful for examining how law shapes social life.
The document provides an overview of the rise and fall of WorldCom, a major telecommunications company that collapsed in 2002 due to accounting fraud. It discusses WorldCom's growth through acquisitions in the 1990s, the accounting investigation that revealed $3.8 billion in fraud, and the resulting bankruptcy. It then outlines recommendations to prevent future fraud, including strengthening corporate governance through independent boards and audits, implementing whistleblower policies, and securing financial reporting through controls and periodic reconciliations.
CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
Igor Ellyn, QC, CS is a leading Toronto litigation lawyer, chartered arbitrator and mediator, who specializes in shareholders disputes and arbitration. In this highly informative presentation, Mr. Ellyn discusses litigation and arbitration of shareholder oppression cases.
If it’s happening in Delaware, you want to know about it. 65% of the Fortune 500 are incorporated in Delaware, and over 150,000 new entities were formed in 2013 alone. Whether you work in a corporation or at a law firm, you’ll need to answer the questions, “Why Delaware?” and “What do I need to know to get the best results?”
Join CT’s expert staff attorneys for a unique view on working with Delaware. No other registered agent does as much work with Delaware — you’ll learn nuances and experience you simply can’t get anywhere else.
Small and medium sized businesses are the engines which drive the North American economy. Increasingly, people go in to their own business. Often spouses and other family members are in business together. Because of mutual trust and sharing which exists at the start of these arrangements, spouses tend not to make agrements about what will happen if the marriage breaks down.
When spouses who are in business together divorce, there are also consequences for the business. Who will keep the business? What will the spouses be able to work together? How much is the business worth? Who should buy the business? How will a buyout be funded? These questions are just the tip of the iceberg.
In this PowerPoint slide presentation, we provide useful information about the legal problems confronting separating or divorcing couples who are in business together. By reviewing these slides you will gain important insights about the issues lawyers have to deal with in these situations. What law applies? What other kinds of experts do you need? What legal advice will you need to find a workable resolution? What evidence will you need if the case has to go to trial? What procedure must be followed? If you are in business with your spouse or life partner, the information in these slides provides a few pointers about Ontario law even if the relationship is continuing. Sometimes, a unanimous shareholders’ agreement or some strategic advice can help avoid expensive litigation down the road.
These slides were part of a presentation at a lawyers conference conducted by Osgoode Professional Development in Toronto on March 27, 2012. They are intended as information only and not legal advice.
The authors are experienced litigation and arbitration lawyers in Toronto, Ontario, Canada, who act on complex shareholder disputes, typically involving closely-held corporations.
This document provides an overview of bankruptcy law concepts including eligibility for bankruptcy, how bankruptcy changes leverage for parties, why companies file for bankruptcy, and the automatic stay. It discusses a hypothetical scenario involving a distressed Manhattan office building and examines bankruptcy issues that may arise, such as filing eligibility for limited liability companies. The document also covers factors courts examine for bad faith filings and cases where independent directors or "friendly" involuntary bankruptcy petitions were used.
corporate law (CL) Under company act 2013.
What is corporate law? The background of Companies Act 1956. What is the importance of this Act?
Memorandum of association. Doctrine of ultra vires. Articles of association. Doctrine of indoor management.
CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
The verb "to file" can be used with the following nouns: an action, an appeal, an amendment, a brief, charges, an injunction, a motion, a suit. These nouns refer to legal documents or actions that can be officially submitted or registered with a court.
This document discusses key concepts related to corporate entities. It defines a corporation as a legal entity created by state statute that allows individuals to operate a business. It describes different types of corporations including private, public, and quasi-public corporations. Key elements of incorporation like articles of incorporation, bylaws, and shares are explained. The document also distinguishes between de jure and de facto corporations and discusses piercing the corporate veil.
Unclaimed Property – History, Audit Trends and Legislative Developments - Presentation delivered by Mike Stehly, Vice President, Tax, US Foods, Inc. at the marcus evans Tax Officers Summit Nov 13-15 2014, Las Vegas, NV
The document discusses company law in Malaysia. It defines a company according to the Companies Act 1965 as an association formed and registered under the act. The core regulations are the Companies Act 1965 and Companies Regulations 1966. There are different types of companies including private limited companies and public limited companies. A public company must satisfy certain requirements regarding share capital, number of members, and name. After registration, a company becomes a separate legal entity distinct from its members.
This presentation by Russell Shapiro addresses the legal aspects involved in combining two accounting firms, including the process, confidentiality agreement, letter of intent, partner on-boarding, structure of transaction, agreement terms, due diligence, tail insurance, and internal target issues.
DiConza's slides on bankruptcy law, from NYU class, 2013.pdfChristian Olesen
The document provides an overview of corporate bankruptcy and restructuring options, including:
1) Most large companies attempt to privately restructure debt through a workout before filing for Chapter 11 bankruptcy due to the direct and indirect costs of bankruptcy.
2) Eligible entities for different bankruptcy chapters include individuals, corporations, and certain special entities like railroads and stockbrokers.
3) The main types of bankruptcy cases are liquidation under Chapter 7 and reorganization under Chapter 11, and cases can be voluntary or involuntary.
4) Key aspects of bankruptcy include the automatic stay, creation of an estate, claims process, and ability to obtain financing through use of cash collateral or debtor-in-possession financing.
Selecting a new business entity type used to be straightforward — the corporation or the LLC.
However, in today’s fast-changing business market states are authorizing new statutory entity types to meet specific needs of business owners. That’s great, because the more choices available, the better your chances of finding a good fit for business owners’ and investors’ needs. But now you have more entity types to consider. How do you choose?
In this in-depth seminar, you’ll get acquainted with new entity types that are gaining in popularity and ascertain the key considerations when researching what entity type is best for your organization or client.
This document discusses payday lending and its alternatives. It defines payday loans as short-term loans where a borrower receives cash in exchange for writing a post-dated check or authorizing electronic access to their bank account. The document outlines that most federal consumer credit laws apply to payday lending and notes some unique issues these loans raise. It also discusses the various state laws that regulate payday lending. Finally, the document lists some alternatives to payday loans, including longer-term loans, borrowing from friends or family, pawn shops, and selling possessions.
The document discusses different forms of business ownership including sole proprietorships, partnerships, corporations, and limited liability companies. It provides details on the key characteristics of each form such as division of profits, extent of liability, control, and tax implications. The ideal form of ownership depends on factors like the nature of the business, capital requirements, risk level, and government regulations. The government also provides various measures like financial assistance and industrial parks to support small businesses in India.
The document discusses different forms of business ownership including sole proprietorships, partnerships, corporations, and limited liability companies. It provides details on the key characteristics of each form such as division of profits, extent of liability, control, and tax implications. The ideal form of ownership depends on factors like the nature of the business, capital requirements, risk level, and government regulations. The government also provides various measures like financial assistance and industrial parks to support small businesses in India.
Those involved in business formations may unknowingly be violating professional conduct rules. As compliance requirements evolve to protect against money laundering, terrorism, and tax evasion, it has become harder for attorneys to keep up. But those who fail to comply can face serious fines and may even lose their license altogether.
Join this on-demand webinar to safeguard against ethical violations. Attendees will have a better understanding of compliance requirements, new and emerging legislation, and best practices for new client due diligence.
Learn about:
- The intersection of business formation and money laundering/terrorism/tax evasion
- How attorney-client privilege is impacted by current and emerging legislation
- Penalties for doing business with certain risk groups
- The ABA's Gatekeeper initiative that offers risk-based guidance
- Ethical considerations of potential anti-money laundering requirements for lawyers
- Due Diligence guidelines to prevent ethical dilemmas
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Garth Jacobson, Esq. – CT Government Relations and Regional Attorney
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- Contracts
- Entity Records
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- Timing
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Delaware Entity Laws
Mergers
Business Entity Formation and Maintenance
Compliance and Governance
Limited Liability Companies
Specialty/Alternative Entity Types
Ethical Considerations Surrounding Entity and Compliance Issues
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Delaware and Texas Business Entity Law Comparison Overview & Legislative UpdatesCT
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Viewers will learn about:
the importance of Delaware and Texas to the business landscape the background for each state that provides further context a comparison of business entity laws and related filing and court systems the latest legislative and policy updates for each state as they impact corporations, LLCs, and partnership statutes
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Lori Ann Fox, Esq., CT Transactional Business Consultant
Lori Ann Fox has been with CT Corporation for over 10 years and currently serves as a Dallas-based Transactional Business Consultant where she directly supports client goals and strategies with her extensive knowledge, skills, and experience. Previously, she served as the Government Relations and Regional Attorney, focusing on legal and regulatory issues, and working closely with state bar associations, government offices, and legislatures to implement changes in business entity and related laws.
Ms. Fox sits on legislative drafting committees and is a contributing member for both the Texas Business Law Section’s Business Organizations Code committee and the Blockchain and Virtual Currencies Committee. She is an active committee member for the Association for Corporate Growth Dallas-Fort Worth Chapter and regularly lectures across the U.S. on topics related to business entity and due diligence laws, filings, and searches.
Prior to joining CT, Ms. Fox maintained a private practice focusing on corporate law, which was preceded by her serving as General Counsel for an insurance company. She received her law degree from Emory University School of Law and is a member of the State Bars of Texas, Oklahoma, and Georgia.
This document summarizes Alan Stachura's presentation on recent Delaware legal updates. The presentation covered: (1) key statistics on Delaware entity formations in 2018, including over 200,000 new entities formed; (2) new legislation under Senate Bills 88, 183, 89, 90, and 91 that updates requirements for corporations, LLCs, LPs, and other entities; and (3) reminders about annual reporting and franchise tax deadlines and payment amounts for corporations and other business entities.
Bianca Erb is a senior business consultant at CT Corporation who has over 13 years of experience helping clients with global expansion. Her presentation discusses key considerations for global expansion, including know-your-client (KYC) regulations and anti-money laundering compliance, business formation and dissolution processes, and ongoing regulatory updates in foreign jurisdictions. She outlines services CT provides to help clients navigate global regulations and compliance requirements as they conduct business abroad.
Learn about the critical role Independent Directors play in structured finance, credit, real estate and securitized transactions. This webinar will detail how an Independent Director serves on the board of directors for a special purpose entity to help to manage a loan and keep deals moving forward.
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Duties and responsibilities of each (position)
Procedures for handling a possible Bankruptcy proceeding
How to identify a competent Independent Director
How CT can help
Presenter: Vic Duva, Director of Corporate Staffing
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Organizations have benefited from strong economic growth and an increase in global deals. However, those in charge of entity management have the added burden of ensuring subsequent legal, regulatory, and contractual compliance. Alleviate risk and strengthen your control on global compliance with this complimentary webinar.
Improve decision making with expert insights into key factors such as legislative updates, anti-money laundering regulations, and transaction compliance. Plus, learn how to best leverage technology to streamline processes and ensure compliance.
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Keeping up with on-going local legislation changes
Risk of non-compliance with local regulation changes
Anti-money laundering regulations
Pre- and post-transaction compliance checklist
Leveraging technology to ensure global compliance
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Reasons assumed names are used
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Contracts
Entity records
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Learn about the key trends and recent legislative updates in the nation’s most popular state to incorporate. In addition, attendees will have the opportunity to hear about pending and future legislation, as well as gain insight into changes in franchise taxes and annual reports.
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Federal diversity jurisdiction is conditioned on two requirements – the amount in controversy must exceed $75,000, and there must be “complete diversity,” meaning that no defendant may have the same “citizenship” as any plaintiff.
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CTKnowledgeShare: CT Corporation is dedicated to educating our customers on the most current and essential topics for corporate legal and compliance professionals.
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Lifting the Corporate Veil. Power Point Presentationseri bangash
"Lifting the Corporate Veil" is a legal concept that refers to the judicial act of disregarding the separate legal personality of a corporation or limited liability company (LLC). Normally, a corporation is considered a legal entity separate from its shareholders or members, meaning that the personal assets of shareholders or members are protected from the liabilities of the corporation. However, there are certain situations where courts may decide to "pierce" or "lift" the corporate veil, holding shareholders or members personally liable for the debts or actions of the corporation.
Here are some common scenarios in which courts might lift the corporate veil:
Fraud or Illegality: If shareholders or members use the corporate structure to perpetrate fraud, evade legal obligations, or engage in illegal activities, courts may disregard the corporate entity and hold those individuals personally liable.
Undercapitalization: If a corporation is formed with insufficient capital to conduct its intended business and meet its foreseeable liabilities, and this lack of capitalization results in harm to creditors or other parties, courts may lift the corporate veil to hold shareholders or members liable.
Failure to Observe Corporate Formalities: Corporations and LLCs are required to observe certain formalities, such as holding regular meetings, maintaining separate financial records, and avoiding commingling of personal and corporate assets. If these formalities are not observed and the corporate structure is used as a mere façade, courts may disregard the corporate entity.
Alter Ego: If there is such a unity of interest and ownership between the corporation and its shareholders or members that the separate personalities of the corporation and the individuals no longer exist, courts may treat the corporation as the alter ego of its owners and hold them personally liable.
Group Enterprises: In some cases, where multiple corporations are closely related or form part of a single economic unit, courts may pierce the corporate veil to achieve equity, particularly if one corporation's actions harm creditors or other stakeholders and the corporate structure is being used to shield culpable parties from liability.
2. Overview of Seminar
• Part I – An Overview of LLC Law
• Part II – LLC Statutory Law Today
• Part III – LLC Case Law Today
• Part IV – LLC Law Beyond Today
1
4. What Do We Mean By LLC Law?
• State LLC statutes
– Laws authorizing formation of LLC and governing LLCs formed there
under
• LLC case law
– Cases involving LLC’s internal governance
– Cases involving rights, duties, liabilities of owners and managers
3
5. Five Key Features of the LLC
These features affect both LLC statutes and case law:
– An LLC is hybrid entity
– An LLC is, in most cases, a closely held entity
– An LLC is, in most cases, a “pick your partner” entity
– An LLC is a contractual entity
– An LLC is a flexible entity
4
6. Events Influencing LLC Law
• Hamilton Bros. Oil Co. lobbies for LLC Act
• Revenue Ruling 88-76 is issued
• First flexible LLC statute is adopted
• Check-the-box is enacted
5
8. Three Generations of LLC Statutes
• First generation = bulletproof statutes
– Contained unalterable provisions designed to avoid corporate taxation
• Second generation = flexible statutes
– Allowed members to opt out of statutory provisions
• Third generation = first and second as amended
7
9. Why Were Statutes Amended?
• The check-the-box rule
• The need to fill in gaps
• The need to clarify ambiguities
• Legislative anticipation vs. realities
• The need for consistency
• Reaction to court decisions
8
10. Is There A “Typical” LLC Statute?
• Current LLC statutes are not uniform
• But some generalizations can be made
• Will look at “typical” provisions governing:
– Formation
– Members and management
– Mergers and conversions
– Compliance requirements
– Foreign LLCs
– Dissolution
• Will discuss how they have changed from original statutes, why they changed
and how they may change in future
9
12. POLLING QUESTION # 1
How many members does the typical LLC you form have?
A. One
B. More than one but less than ten
C. Ten or more
11
13. Members & Managers
• Members
– Membership interest
– Springing member
– Allocating rights
– Transferability of interest
– Withdrawal
– Charging order
• Managers
– Formalities
– Fiduciary duties
– Statutes differ significantly
– Source of litigation
12
14. Mergers and Conversions
• Mergers
– LLC laws – Now and Then
– Reason for amendments
– Future changes?
• Conversions
– LLC laws – Now and Then
– Current statutes meet the needs of businesses that want to change forms
– Amendments have been made to make provisions more consistent with other
entity statutes
13
15. Compliance Requirements
• LLC acts are “enabling” not “regulatory”
• LLC acts do not have many compliance requirements
• Compliance requirements in business entity laws often there to protect
owners
• In LLC it is thought members can protect themselves in their OA
• Three main compliance requirements
– Annual report
– Registered agent
– Recordkeeping
14
16. Foreign LLCs
• Statutes deal with limited issues
• Not many changes over years
• Formation state governs
– internal affairs
– liability of members and managers
• Qualification/registration required
15
18. POLLING QUESTION # 2
Are you familiar with the Series LLC?
A. Yes
B. No
17
19. Series LLC - Diagram
Series A
(Hotel)
Series D
(Apt)
Series C
(Mall)
Series B
(Land)
Series E
(Gas Station)
18
20. Series LLC
• An LLC that is divided into separate series
• Each series functions like a separate LLC
• If properly formed and maintained, debts of a series can be satisfied from
that series only
• Delaware was first state to authorize
• Other states include AL, DC, IL, IA, IN (1/17), KS, MO, MT, NV, OK, TN, TX, UT
19
21. Series LLC
Questions surrounding Series LLCs
– How will Series LLC and series be taxed?
• PLR 200803004 – IRS treated each series separately
– Will foreign state that does not provide for Series LLC respect separation of
liabilities?
– Can series, in its own name, enter into contracts, sue or be sued, own legal title to
real estate?
– Can series file for bankruptcy or register under securities laws?
20
23. Some General Observations
• LLC law is also made by judges
• Steady increase in number of cases nationwide
– Not evenly distributed however; some states hearing more LLC related
litigation than others
– Not a great deal of decisions from high courts
– Cases involving single member LLC
22
24. Some General Observations
Some issues seen in LLC cases today
– Cases requiring court to interpret LLC statute
– Cases requiring court to interpret OA
– Cases involving attempts to impose liability on member
– Cases seeking to hold manager liable for breaching fiduciary duties
– Cases questioning authority of member or manager to act for LLC
– Cases involving LLC treatment under statute not specifically applicable to LLCs
23
25. Interpreting a State LLC Statute
• Goal of court is to give effect to legislative intent
• Begin with ordinary meaning of words
• Read words in context so that they are consistent with rest of provision
and statute
• Court may look to analogous provision of corporation, LP, GP law
• Court may look at what other state courts have done
24
26. Davis v. Winning Streak Sports, LLC
• 2013 Kan. App. LEXIS 16
• Sec. 17-7670 of KS LLC act – To the extent that a member has been
successful on the merits or otherwise or in the defense of any action that
member shall be indemnified against expenses actually and reasonably
incurred
• Member sought a declaratory judgment that he owned a 49% interest in an
LLC
• LLC claimed he owned 0%
• Jury found plaintiff owned 0.96%
• Pl sought mandatory indemnification under Sec. 17-7670
25
27. Davis v. Winning Streak Sports, LLC
• Trial court found for LLC because Pl was only nominally successful and not
prevailing party
• KS Ct of App reversed
– Statute does not require complete success
– Pl was successful in obtaining a declaration that he was member even though it
was for less of an interest than he sought
– Pl was thus entitled to indemnification
26
28. NY Derivative Suit Cases
• NY LLC Law does not have provision stating that member may bring
derivative suit
• Early draft of LLC law had a derivative suit provision; Provision removed
before enactment
• Lower state courts and federal district courts had split on whether
member had common law right
• Courts denying right found that removal of provision = legislative intent
not to allow derivative suits
• Courts granting right based it on fact shareholders and limited partners
have right and that removal of provision from draft is not clear legislative
intent to deny right
27
29. NY Derivative Suit Cases
• Tzolis v. Wolff, 884 N.E.2d 1005 (N.Y. 2008)
– Court of Appeals upholds member’s right to bring derivative suit
– Courts have repeatedly recognized derivative suits in absence of express
statutory authorization
– Shareholders and limited partners have both statutory and common law right
to bring derivative suit; no reason to treat members differently
– Reason for derivative suit - so that victims of faithless fiduciaries have a
remedy – still valid
– No evidence legislature intended to take radical step of abolishing derivative
suit
28
30. Interpreting OA
• Courts apply principles of contractual interpretation
• Function of court is to ascertain shared intentions of parties
• First give words ordinary meaning
• Avoid result parties could not have intended
29
31. Majkowski v. American Imaging Mgmt Services, LLC
913 A.2d 572 (Del. Ch. 2006)
Background:
– LLC agreement did not mention advancement
– LLC agreement stated that LLC would “indemnify and hold harmless”
– Plaintiff claimed “hold harmless” included advancement
• Had to have meaning other than indemnify or phrase would be surplusage
• Claimed harm by having to pay litigation expenses
Court:
– Ch Ct held that phrase “indemnify and hold harmless” had long history of
usage and was second nature to many drafters
– Held that plaintiff’s argument would bend contractual language to read a
meaning parties did not intend
30
32. Fundamental Long Term Care Holdings, LLC
v. Cammeby’s Funding LLC 2013 NY Slip Op 951
Background:
– OA required capital contribution of at least fmv of interests before new member
admitted
– LLC entered into option agreement entitling holder to one-third interest for
$1,000 upon exercise
– LLC refused to issue membership interest to option holder; sought declaration
that holder had to provide capital contribution pursuant to OA
Court:
– NY Ct of App held option holder was entitled to one-third interest
– OA and option agreement were not intertwined
– Option agreement unambiguously granted holder right to acquire interest for
$1,000
– Parties were sophisticated and if they meant for OA fmv provision to apply they
would have so provided
31
33. Member Liability Cases
• Many LLC cases involve attempts to impose liability on member
• Third party seeking to hold member liable for LLC debts
• Third party seeking to hold member liable based on member’s
participation in LLC’s wrongful conduct
• Member, manager, LLC seeking to hold member liable for breach of
fiduciary duty
• Member seeking to hold member liable for breach of OA
32
34. AT&T Advertising L.P. v. Winningham
2012 Ok. Civ. App. 51
Background:
– Example of member being held liable LLC debts
– Member sued for money owed on contract entered into by LLC
Courts:
– Trial court – summary judgment to plaintiff; LLC was cancelled by SOS at time of
signing contract so no liability shield
– Court of Civil Appeals affirmed
• LLC cancelled for non-payment of fees for three years does not provide shield for its agents
• OK LLC Act distinguishes between LLC in good standing and one that has been cancelled,
which does not exist and cannot provide shield
33
35. 3rd Party Suit to Recover LLC Debts
• LLC statutes provide that member is not liable for LLC’s debts based on
status as member
• But member may be held liable if court “pierces veil”
• Court may pierce if plaintiff establishes:
– Member completely controlled LLC including policies and practices with respect
to transaction complained of
– Control used to commit fraud, wrong, breach of duty
– Control and breach caused plaintiff’s injury
34
36. ORX Resources v. MBW Exploration, LLC
32 So.3d 931 (La. App. 4 Cir. 2010)
Background:
– Pl was drilling an oil well
– Contracted with LLC to share expenses and profits
– Oil well failed
– Pl sued LLC’s managing member for breach of contract to recover LLC’s share of expenses
Courts:
– Trial ct – veil piercing applies to LLCs; member was LLC’s alter ego and liable for its debts
– Appellate court affirmed
• Piercing justified when LLC is used to defraud creditors
• Def member used LLC as a shell to avoid paying debts
• Evidence showed LLC was undercapitalized, funds were commingled, formalities not
followed (All factors that support piercing the veil)
• LLC had no bank account; LLC’s fees were paid from member’s personal account or
account of another company of his
• LLC had not yet been formed when member signed contract on its behalf
• No meetings had been held in over a year
35
37. Martin v. Freeman
• 272 P.3d 1182 (Colo. App. 2012)
• Facts:
– Pl obtained judgment against SMLLC
– While suit pending LLC sold airplane that was only significant asset
• Court pierced veil to hold member liable for judgment
– Main factor – proceeds from airplane sale were diverted to member’s
personal account
– Courts do not have to consider that LLCs have fewer restrictions than
corporations in observing formalities
– Wrongful intent or bad faith need not be shown
36
38. Serio v. Baystate Properties, LLC
• 60 A.3d 475 (Md. App. 2013)
• Pl contracts with Md LLC
• Pl is to build homes on land owned by LLC’s member and be paid upon sales of homes
• Pl is not paid for sales on two lots and files suit, seeking to pierce LLC veil to hold
member liable
• Md law – Cts will pierce only when necessary to (a) prevent fraud or (b) enforce a
paramount equity
• Trial Ct pierces LLC veil to hold member liable
– Finds no fraud
– But piercing necessary for equitable purposes
• Member misled Pl about sales
• LLC failed to create escrow account as agreed upon
• Member’s conduct left LLC insolvent
37
39. Serio v. Baystate Properties, LLC
• Md Ct of Special Appeals reversed
– Looks to corporate law cases
– Cts find no equitable interest more paramount than state’s interest in limiting
shareholder liability
– Therefore a finding of fraud is required to pierce
– Conduct trial court relied on – misleading Pl, rendering LLC insolvent, trying to
evade a legal responsibility – have not been held as enough to pierce in the
corporate cases
– Here, Pl knew it was contracting with LLC and was not expecting member to make
payments
– Thus, trial court erred in piercing the LLC’s veil in this case
38
40. Liability Based on Member’s Conduct
• Statutes do not insulate members from liability for their own actions
• If plaintiff can establish that member participated in LLC’s wrongful
conduct, member can be held liable
39
41. Mbahaba v. Morgan
• 44 A.3d 472 (N.H. 2012)
• Tenant in building owned by LLC brought suit ag LLC and member after
tenant’s daughter was poisoned by lead paint
• Trial Ct dismissed claims ag member
• NH SCt reversed
• Under NH LLC Act member is not vicariously liable for LLC’s obligations
• Here, Pl was attempting to hold member liable for his own negligence in
managing the building and breaching his duty to avoid exposing tenants to
unreasonable risk of harm
• Pl claim should survive motion to dismiss
40
42. Member Breach of Fiduciary Duty Cases
• Member may be sued for breaching a fiduciary duty
• Fiduciary duty may be based on LLC statute, OA provision, common law
41
43. Gottsacker v. Monnier
2007 Wisc. App. Lexis 68
• Background:
– LLC had 3 members – Gregory, Paul, Julie; no OA; asset was a piece of real estate
– Paul and Julie formed a new LLC w/o telling Gregory, voted to sell LLC’s real estate to new LLC
– Gregory sued
• Courts:
– Trial court held willful unfairness requires both unfair conduct and resulting injury
– WI S Ct - Sec. 183.0402 forbids willful unfairness
• No member or manager shall act in a manner that constitutes a willful failure to deal fairly
with LLC or members in connection with a matter in which member or manager has a conflict
of interest
– On remand, trial court found Paul and Julie did not violate Sec. 183.0402; appellate court
affirmed
– Certain actions of Paul and Julie could be construed as unfair
• No notice of meeting or opportunity to vote on sale
• No effort to find other buyers
• Sale left LLC without assets
– However result was not unfair
• Even if allowed to vote Gregory could not have prevented sale
• Purchase price was fair, it eliminated LLC’s debts and Gregory was paid his fair share
42
44. Suits for Breach of OA
• One issue is whether breach occurred
• Another issue is if member breached OA, what is remedy?
• Court can use equitable powers to fashion remedy
43
45. Eureka VIII LLC v. Niagara Falls Holdings LLC
899 A.2d 95 (Del. Ch. 2006)
– Decision affirmed by DE Supreme Ct (Niagara Falls Holding, LLC v. Eureka VIII LLC, No. 413,
2006 (Del. Supr. 2007)
Background:
– LLC formed to develop property
– 2 members; Milstein provided financing, Cogan provided skills to operate business
and licensing rights
– Milstein invested based on Cogan’s know how and did not intend to be partners
with anyone else
– LLC agreement contained restrictions on transferability
– Cogan went bankrupt and died, resulting in creditor taking over Cogan’s interest in
LLC
– Milstein sued for breach of LLC agreement’s transferability restrictions
– Milstein sought a declaratory judgment that it was sole member - a remedy not
provided for by LLC agreement or statute
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46. Eureka VIII LLC v. Niagara Falls Holdings LLC
• Court:
– Ch Ct found breaches occurred and declared that creditor had rights of
assignee only and that Milstein was sole member
– Court’s remedy based on Sec. 18-702
• Provides that member ceases to have rights and powers of member upon
assignment
• Policy – it is far more tolerable to suffer a new passive investor than a new co-
manager
• Although no assignment here, it was analogous situation
• Breach of LLC agreement had same affect as if Cogan had assigned interest to
creditor
• Milstein should not be bound to manage and operate LLC with a co-member it did
not choose
• Creditor limited to financial interest
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47. Manager Breach of Fiduciary Duty Cases
• May be brought by LLC or member
• May be direct or derivative suit
• Fiduciary duties may be imposed by OA, statute, or common law
46
48. Wood v. Baum
• 953 A.2d 136 (Del. Supr. 2008)
• Derivative suit alleging directors of public LLC breached fiduciary
duties
– Caused LLC to issue false financial statements, failed to institute controls
over reporting
• Plaintiff alleged demand futility based on directors’ substantial risk
of liability
• OA exempted directors from liability except in cases of fraud or
illegal conduct
• Del. S.Ct – directors’ exposure to liability was limited to claims that
they knowingly engaged in fraudulent or illegal conduct or bad faith
violation of implied contractual covenant of good faith and fair
dealing
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49. Wood v. Baum
• Court ruled plaintiff did not allege particularized facts that, if proven,
would show that majority of directors faced liability
• Complaint alleged directors engaged in following acts
– Executed LLC’s publicly filed financial reports
– Authorized certain transactions
– Served on audit committee
– Ignored red flags
• Court ruled none of those acts established knowing participation in
illegal conduct
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50. POLLING QUESTION # 3
Are you familiar with the Delaware LLC fiduciary duties standards?
A. Yes
B. No
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51. Gatz Properties, LLC v. Auriga Capital Corp.
59 A.3d 1206 (Del Supr. 2012)
• Case creating split over default fiduciary duties
• Minority members sued manager alleging breach of fiduciary duties after he bought
them out for price well below market value
• Courts
– Ch Ct holds that managers owe default fiduciary duties of care and loyalty
– S Ct states that Ch Ct’s ruling that managers owe default fiduciary duties was dicta and had no
precedential value
• Where there is a contractual provision imposing fiduciary duties there is no need to decide if there are
default duties
• No party asked the Ch Ct to decide the issue
• Reasonable minds can differ so it is up to General Assembly to clarify
• Legislative reaction
– Amendment to 18-1104
– In any case not provided for in this chapter, the rules of law and equity, including the rules of
law and equity relating to fiduciary duties and the law merchant, shall govern
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52. Authority to Act Cases
• Informal manner in which LLC may be operated, combined with few
statutory provisions …
• Can lead to litigation over whether members or managers acting on
behalf of LLC had authority to do so
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53. Maitland v. Int’l Registries, LLC
C.A. No. 3669-CC (Del. Ch. 2008)
• Background:
– LLC had 2 equal managing members (Maitland and Guida)
– Maitland sued LLC to enforce inspection rights
– Guida retained counsel for LLC, answer was filed
– Maitland moved to strike answer and disqualify counsel on grounds that
Guida lacked authority to retain counsel and file answer for LLC without
Maitland’s assent
• Chancery Court granted motion
– LLC agreement stated that decision of majority of interests controlled
– Statement in LLC agreement that members are granted all rights, powers,
authority to manage LLC means that one member may manage when other is
silent; does not give one member power to manage when other is opposed
– Neither can unilaterally agree to retain counsel and file answer
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54. Statutory Treatment of LLCs
• Early question about LLCs – how would they be treated under
statutes/regulations specifically dealing with corporations and/or
partnerships but not LLCs?
• Over the years some amendments have been made to clarify LLC
treatment
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55. Champluvier v. Mississippi
• 942 So.2d 145 (Miss. 2006)
• Example of how some statutes were amended after a court case alerted
legislature to need
• Champluvier was convicted of embezzling money from LLC she formed
• Section of law she was convicted under applied to agents, officers, etc. of
“incorporated company”
• Mississippi Supreme Court overturned conviction because LLC is not an
incorporated company
• Section of law amended shortly thereafter to broaden application
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56. LLC Diversity Cases
• Federal diversity jurisdiction requires plaintiffs and defendants to be
citizens of different states
• 28 USC 1332(c)(1) – corporations are citizens of state of incorporation and
state where principal place of business is located
• Issue – does Sec. 1332 (c)(1) apply to LLCs?
• Nearly all US Courts of Appeal have dealt with the issue. Every one held
that Sec. 1332 (c)(1) does not apply to LLCs
– Congress chose to include corporations only
– Up to Congress to amend to include LLCs
• Current law – LLC is citizen of all states in which its members are citizens
• Future – Will Congress or US SCt make a change?
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57. Cases Involving Single Member LLCs
• LLC acts generally written with multi-member LLCs in mind
• Concept of SMLLC does not fit neatly in all provisions, especially those
protecting members from actions of co-members
• In some cases courts have declined to apply certain sections of LLC act to
SMLLC
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58. In re Modanlo
• 2008 US App LEXIS (4th Cir.), affirming, In re Modanlo, 2006 Bankr. LEXIS
4524 (D.Md)
• Member of DE SMLLC filed for bankruptcy
• Bankruptcy trustee sought to manage LLC
• Member argued trustee had, at best, rights of assignee, but no governance
rights
• Court held for trustee. Ruled three sections of DE LLC Act did not apply to
SMLLC
– Sec. 18-304 – default rule that member ceases to be member upon filing for
bankruptcy
– 18-702, 18-704 – default rules that assignee has no right to participate in
management and may become member upon consent of all members
– These sections are intended to protect member from actions of co-member. Not
applicable when there is no co-member
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59. Olmstead v. FTC
• 44 So.3d 76 (Fla. 2010)
• FTC obtained $10 million judgment against individuals who owned FL SMLLCs
• 8th Cir certified question to FL SCt asking whether charging order provision of FL LLC act permits
court to order a judgment debtor to surrender all rights, title, interest in debtor’s SMLLC to satisfy
judgment
• FL SCt ruled that FL law permits court to order surrender of full interest in SMLLC; court not
limited to charging order
– Charging order provision is part of section on assignee rights; requires consent of “all members
other than member assigning interest” for assignee to take full interest. In SMLLC – no other
members
– Charging order is special remedy for creditor when debtor’s LLC interest is not fully
transferable but subject to right of other members to object to transferee becoming member
– LLC act provision does not state that charging order is exclusive remedy; in contrast, LP and GP
provisions state remedy is exclusive
• Aftermath – FL and other states amended LLC acts to specify that charging order provision applies
to SMLLC
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61. The Uniformity Movement
• LLC statutes may change if states adopt uniform and model acts
• Uniformity movement
– Began at end of 19th century because different and conflicting laws were
creating confusion and hindering trade
– Main drafting groups – NCCUSL and ABA
• Model vs. uniform law
– Model – template expected to be modified by each state rather than adopted
in whole
– Uniform – intended to be adopted without revision
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62. Revised Uniform LLC Act (RULLCA)
• ULLCA adopted by NCCUSL in 1995
– Only nine states adopted
• RULLCA adopted by NCCUSL in July 2006
– Drafters claim it reflects current LLC needs, goals, uses better than ULLCA
– If drafters are correct, RULLCA may prove more popular with states than ULLCA
– As of March 29, 2016 adopted by AL, CA, DC, FL, ID, IA, MN, NE, NJ, ND, SD, UT,
VT, WA, WY (as per uniformlaws.org)
– 2016 introductions: CT, IL, PA, SC
• Formation document called certificate of organization
– Signal that document reflects existence of LLC rather than location of
governance rules
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63. RULLCA
• Some of the innovations (according to the co-reporters) include the
following
• Emphasis on OA as foundational document
• “Uncabining” of fiduciary duties
– Instead of exhaustively codifying as in RUPA, ULPA, ULLCA, RULLCA partially
codifies and increases power of OA to define
• Restates duty of care
– From gross negligence to simple negligence, subject to business judgment rule
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64. RULLCA
• Eliminates statutory apparent authority
– Member of member managed LLC not an agent solely by being member
– Power to bind based on agency principles
• Permits filing of statement of authority
– States authority or limitation of authority of person holding position to which
statement relates
• Creates statutory remedy for oppressive conduct by controlling member
– Minority member may apply for dissolution
– Court may grant other remedy
• Does not include Series LLC provision
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65. Model Entity Transactions Act (META)
• Model act approved by NCCUSL and ABA in 2005 and amended in 2007
• Response to problems involving inter-entity mergers, conversions and
other transactions involving different types of entities
• Inter-entity transactions require compliance with statutes that differ in
areas such as
– Whether transaction is authorized
– What entities may participate
– What document is filed
– Whether delayed effective date is allowed
– Effect of transaction
– Ability to abandon or amend plan
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66. META
• Provides single set of procedures for all entity types for
– Multi-entity mergers
– Multi-entity interest exchanges
– Conversion
– Domestication
• States adopting would repeal provisions in LLC act and META would govern
– As of March 29, 2016 adopted by AK, AZ, CT, DC, ID, KS, PA (as per
uniformlaws.org)
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67. Model Registered Agents Act (MoRAA)
• Joint project of NCCUSL and ABA; approved in 2006
• Deals with registered agent issues
• Applies to all forms of entities
• As of March 29, 2016 adopted by AR, DC, ID, ME, MS, MT, NV, ND, SD, UT, WY
(as per uniformlaws.org)
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68. Model Registered Agents Act (MoRAA)
• Provisions deal with
– Addresses in filings
– Content of filings appointing registered agent
– How to change registered agent
– Resignation of agent
– Duties of registered agent
– Eliminates publication and venue functions of registered office
– Permits listing of commercial registered agent
• Adopting state would repeal conflicting provisions from LLC statutes and
MoRAA would govern
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69. Recap
• Overview of LLC law
– Key features & events
• LLC statutes today
– “Typical” provisions governing formation, members, management, merger and
conversion, compliance requirements, foreign LLC, dissolution, Delaware LLCs,
Series LLCs
– How and why they changed over the years
• LLC case law today
– Interpreting LLC statute and OA
– Member and manager liability and authority to act
– Treatment under certain statutes
– Single member LLC
• LLC law beyond today
– RULLCA, META, MoRRA
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70. THANK YOU FOR ATTENDING
LLC LAW TODAY & BEYOND - 2016
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