2019 Essentials of Business Law

This paper will address basic issues for securities law compliance for an exempt offering of securities in the State of Texas. Set out below are the basic building blocks of federal and state securities requirements that with the principal purpose of guiding compliance with securities laws concerning the offering and sale of equity in a client’s business. Compliance may consider issues such as the client in choosing the form of business entity, identifying and quantifying the risk of the transaction, as well as assisting the client in identifying the nature of the investors most likely to consider an investment in the proposed transaction. This paper, however, will focus on an overview of how to comply, with some explanation about the history and thought processes involved, so as to help you off to a running start. I will focus on the most common federal exemption, since that is the most simple and common form of compliance (very easy to find templates and “go-bys”), and also makes state compliance the most straight forward. Other possibilities for compliance are listed, both for education and also to make you aware of other possible compliance regimes if the most common is not available or a good fit. This paper will not, however, be a compendium. For example issues such as what constitutes a “security,” or liabilities for issuers and their control persons, or principles of rescission (to fix a broken exemption) are all outside the scope of this paper.

Byron Egan compares Texas and Delaware law relating to different kinds of business entities, including across taxation, management, fiduciary duty, business combinations, indemnification, piercing the corporate veil, allocations, distributions, and joint ventures among entities.

Preparation is the key to successfully marketing and selling any business. But selling a business is not a one‐size‐fits‐all proposition; each industry, and each business within an industry, has unique characteristics that must be considered. Moreover, each business owner has unique and specific goals. Sometimes co‐owners have different goals, which can present challenges. However, there are common principles in preparing a company for sale that can help any size or type of business.

In the same way emergency room doctors and nurses are simply more effective in treating their trauma patients if they are not, themselves, vicariously wounded, so are attorneys most effective when they are able to retain a certain professional detachment from the trials and tribulations of their clients – serving their best interests, of course, but never actually becoming one of the adversaries, per se, in the legal conflict. In exchange for this professional immunity from the struggles our clients and their adversaries must endure, society demands of all attorneys, through well-settled rules we will be talking about below, certain minimum standards of conduct.

Companies are beginning to understand that cyber is an overall business risk, not just a technical issue. Now they must realize that cyber is also a legal issue. The easiest way to understand why is to ask these two questions: “Why do we know about the data breaches of Target, Yahoo, Equifax, and all the others?” “Did those companies air their dirty laundry just because they believed it was the right thing to do?” Of course not! They did so because laws and regulations made them. Those laws and regulations require companies to disclose their breaches and mandate things such as who they must notify, when and how they must notify, what must be communicated, and what must be done for those who were impacted.

It is often stated that one of the benefits of organizing an entity as a limited liability company is that this form of entity offers the owners and governing authority of the entity the flexibility to agree to provisions for the economic terms and governance that are more flexible than available with respect to a corporation. This is true, and indeed limited liability companies are sometimes used to create highly complex structures with multiple classes of ownership interests and highly customized provisions regarding management and governance of the entity, including complicated provisions for voting and management succession. However, given the large number of entities now being created as limited liability companies in Texas and other states, it is likely that many of these new entities are not entities with complex structures with multiple classes of ownership and complex bureaucracies for governance.The purpose of this paper is to present and discuss models for governing agreements for limited liability companies when a simple structure is needed.

Those coming together to start a business typically are enthusiastic about its prospects and aligned on its future. Yet experience tells us that at some point their views may diverge. When your client or clients are forming a new business or entity, as a lawyer you should encourage them to consider what happens if, in the future, they no longer see eye to eye.

The Fair Labor Standards Act (FLSA) contains several exemptions from its minimum wage and/or overtime requirements. The most well-known are the so-called “white collar” exemptions under FLSA Sections 13(a)(1) and (a) (17). In 2004, the U.S. Department of Labor (DOL) revised its FLSA regulations, which are codified at 29 C.F.R. Part 541. The 2004 revisions modified many of the tests and rules related to the white-collar exemptions. Even after the 2004 revisions, misclassification of employees as exempt has continued to be a major source of legal exposure. In addition, the DOL is close to unveiling its long-awaited plan for scaling back a controversial Obama-era rule that expanded overtime protection for millions of white collar workers.

Planning for the orderly end of a business, by necessity, begins when the entity is first formed and includes a clear-eyed assessment of the events requiring winding up of an entity. Not every client’s circumstances are the same. Thus, the process for handling the winding up and termination will vary. This is an area of business practice where you must be prepared to evaluate many facts and ever-changing circumstances. This Article will provide an overview of the “Events requiring winding up of a Domestic Entity” under the Texas Business Organization Code (“TBOC”) and the steps required to wind up and terminate a Texas entity. And because sometimes plans will change, this Article also will discuss the steps to revoke winding up and termination. Next, this Article reviews standard termination provisions using model organizational documents and provides practical drafting suggestions. This Article highlights cases relevant to the winding up process. Finally, checklists and forms are attached to this Article as appendices to aid in an orderly analysis of termination and dissolution matters. This Article focuses on the TBOC and the Texas Tax Code (“TTC”). Although entities may also be formed under Delaware law or the law of other states or countries, the laws of such other jurisdictions are beyond the scope of this Article.

Business lawyers often encounter and need to prepare various agreements related to the employment relationship, whether those documents be employment agreements, arbitration agreements, or separation agreements. While not an exhaustive list of all matters that need to be considered, this article presents some practical considerations when preparing those agreements.

The life of a lawyer can be very stressful and difficult. Lawyers are handed their clients' worst problems and are expected to solve them. This paper provides some basic information and tools to help lawyers understand and address the serious stress, mental health and substance use issues which so many attorneys face.

Business owners considering lease agreements should carefully consider key provisions, including alteration of common areas, as is delivery and other issues. This article includes a model lease agreement that is annotated.

Onboarding new directors should be based on a well-conceived plan that begins before recruitment and continues to evolve as directors provide input and feedback. There are three basic best practices for onboarding new directors: (1) provide an orientation process similar to onboarding new employees; (2) provide company reading materials, reports, and financial statements so new directors can become familiar with the business, its products and services, its competitors, its market, and its financial status; and (3) schedule meetings with current directors, executive personnel, and corporate counsel to solidify a director’s overall understanding of his/her duties, the culture, expectations and policies of the company.

The Prevalence of Substance Use and Other Mental Health Concerns Among American Attorneys. The study measured the prevalence of these concerns among licensed attorneys, their utilization of treatment services, and what barriers existed between them and the services they may need. Substantial rates of behavioral health problems were found, with 20.6% screening positive for hazardous, harmful, and poten­tially alcohol-dependent drinking.

There is a reason that there are no company mottos that tell you to go out and have a sucky day. There is a reason that you tell someone to “Be Careful” instead of “Don’t have a wreck”. Humans subconsciously listen to the message and hear the main words as in this example, “careful” and “wreck”. Humans are driven through their unconscious mind, which is incapable of absorbing the negative “don’t”. For example: Hold your coffee is absorbed in the unconscious mind, don’t drop your coffee, don’t spill your coffee, and don’t burn yourself on hot coffee is incapable of reaching the unconscious mind.

Now more than ever, employers must have zero tolerance for sexual harassment. Employers must have strong anti-harassment policies and procedures that are implemented and must provide training for supervisors and employees on such. It is imperative for today’s employers to conduct responsible, thorough and effective investigations into sexual harassment complaints. Employers should also provide employees regular training on sexual harassment and reporting policies. This Article discusses what constitutes unlawful sexual harassment and what employers should do in the event of a complaint of sexual harassment, as well as methods to prevent sexual harassment. The purpose of this Article is to arm employers with basic tools to combat sexual harassment and to respond to complaints of sexual harassment.

It has been almost five years since the Texas Supreme Court declined to recognize a common law cause of action for shareholder oppression. Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014). Although it restricted shareholder common law rights, Ritchie did not put an end to shareholder litigation. As highlighted further below, recent cases show that shareholders continue to seek available judicial remedies, including through derivative actions and the various statutory and common law causes of action and remedies outlined by the Court in Ritchie. These cases provide insight into the types of claims practitioners should be cognizant of when advising their clients and drafting organizational documents. Through its repeated emphasis on the use of shareholder agreements, the Court in Ritchie for many situations left it to shareholders and corporations to protect their respective rights and interests and govern themselves by contract. Id. at 871. Thus, five years after Ritchie, the importance of well-drafted shareholder agreements cannot be understated. Accordingly, this article also discusses some of the potential provisions that practitioners should strongly consider including in their organizational documents, including shareholder agreements.

Although early-stage companies have numerous potential paths, many founders simply start with an innovative idea, apprehension about the immediate next steps, and big dreams about building a successful business. Only a select few will cash in on a massive exit or other sale transaction. While some companies initially can survive using the founder’s own money, many companies – especially high-growth potential companies (which are the focus of this article) – need significant investment capital to turn ideas and dreams into a real business. Success or failure in the early-stage financing process often is a keystone on which a high-growth potential company’s future depends. There are many variables to early-stage financing, and missteps during the process can haunt a company throughout its lifespan. When an early-stage company conducts this process in accordance with established norms, we have found that, among other things, financing tends to close quicker, valuations remain intact, and founders have better options for subsequent fundraising rounds.