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May 1, 201906477000
Drafting Preliminary Agreements
A confidentiality agreement (“Confidentiality Agreement”), also sometimes called a non- disclosure agreement (“NDA”), is typically the first stage in the due diligence process for an acquisition transaction as parties generally are reluctant to provide confidential information to the other side without having the protection of a confidentiality agreement. After a Confidentiality Agreement is in place, the parties exchange information and proceed to negotiate the terms of a transaction. If the negotiations are successfully completed, the parties may enter into a letter of intent. While the parties initially intend that a letter of intent does not bind the parties to proceed with a transaction, disputes often arise as to whether and to what extent the parties are contractually bound.
March 1, 2013Robert Arthur
Limited Liability Company Law – Whether a Manager of a Manager-Managed Limited Liability Company Breached Fiduciary Duties Under Delaware Law to the Limited Liability Company and Its Members
Gatz Props., LLC v. Auriga Capital Corp., 59 A.3d 1206 (Del. 2012)
May 1, 2020Elizabeth S. Miller
Overview of Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the Texas business organizations context. The duties of general partners are now defined by statutory provisions that delineate the duties without referring to them as “fiduciary” duties and specifically provide that partners shall not be held to the standard of a trustee. Whether limited partners in a limited partnership have fiduciary duties is not well-settled, but the Texas Business Organizations Code (BOC) clarifies that a limited partner does not owe the duties of a general partner solely by reason of being a limited partner. While the fiduciary duties of directors are still principally defined by common law, various provisions of the corporate statutes are relevant to the application of fiduciary-duty concepts in the corporate context. Because limited liability companies (LLCs) are a relatively recent phenomenon and the Texas LLC statutes do not specify duties of managers and members, there is some uncertainty with regard to the duties in this area, but the LLC statutes allude to or imply the existence of duties, and managers in a manager-managed LLC and members in a member-managed LLC should expect to be held to fiduciary duties similar to the duties of corporate directors or general partners. In each type of entity, the governing documents may vary (at least to some extent) the duties and liabilities of managerial or governing persons. The power to define duties, eliminate liability, and provide for indemnification is addressed somewhat differently in the statutes governing the various forms of business entities.
April 1, 2020Joseph T. McClure
A New Trend in Securities Fraud: Punishing People Who Do Bad Things
This article seeks to articulate a distinct view of federal securities law as it is increasingly used in non-traditional enforcement actions commenced to punish corporate bad behavior. This paper argues that these non-traditional enforcement mechanisms should be viewed with skepticism. This skepticism should not be misinterpreted as cynicism, as the author believes that these non-traditional enforcement actions are beneficial vehicles to accomplish the admirable governmental objective of “punishing people who do bad things.” However, the author recognizes that such use of securities law does not fall into a category of clearly defined criminal law and carries a significant risk of abuse. The author also recognizes the “admirable governmental objective” may be thwarted when it comes to private companies. Finally, the author is uneasy with the societal values conveyed when the government sanctions corporate misbehavior in the name of protecting shareholders from deception.
November 1, 2019Kenneth Geisler II
Hacking Wall Street: Reconceptualizing Insider Trading Law For Computer Hacking and Trading Schemes
Kenneth Geisler II: Current securities law is ill-equipped to deal with computer hackers. He says unlike the typical defendants in insider trading cases, hackers owe no fiduciary duty to shareholders. He argues the SEC has relied on a novel theory of liability that treats hacking and trading as a form of deception.
November 7, 2025Elizabeth S. Miller
Fiduciary Duties, Exculpation, and Indemnification in Texas Business Organizations
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the Texas business organizations context. The duties of general partners are now defined by statutory provisions that delineate the duties without referring to them as “fiduciary” duties and specifically provide that partners shall not be held to the standard of a trustee. Whether limited partners in a limited partnership have fiduciary duties has been somewhat unsettled, but the Texas Business Organizations Code (BOC) clarifies that a limited partner does not owe the duties of a general partner solely by reason of being a limited partner, and the Texas Supreme Court has now expressly acknowledged this principle. While the fiduciary duties of directors are still principally defined by common law, various provisions of the corporate statutes are relevant to the application of fiduciary-duty concepts in the corporate context. Because limited liability companies (LLCs) are a relatively recent phenomenon and the Texas LLC statutes do not specify duties of managers and members, there is some uncertainty with regard to the duties in this area, but the LLC statutes allude to or imply the existence of duties, and managers in a manager-managed LLC and members in a member- managed LLC should expect to be held to fiduciary duties similar to the duties of corporate directors or general partners in the absence of provisions addressing duties in the company agreement. In each type of entity, the governing documents may vary (at least to some extent) the duties and liabilities of governing persons and other managerial officials. The power to define or reduce duties, eliminate liability, and provide for indemnification is addressed somewhat differently in the statutes governing the various forms of business entities.
March 20, 2025Howard Nirken
Fiduciary Duties of Governing Persons in Texas Business Entities
This set of slides describes the relationship and duties of the Board of Directors to corporation and how that affects corporate governance.
March 6, 2021Amy Hefley, Deborah P. Low, D. Ryan Nayar
Current Trends and Business Implications of ESG
ESG stands for environmental, social, and governance (“ESG”) and seeks to set standards that can be used to evaluate the societal impact of an action, such as a company’s operations or an investment. Environmental criteria consider a project’s relationship to nature and whether it has a damaging, neutral or positive impact. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. Interest in ESG has surged in recent years, leading to an influx in the market in ESG investing, reporting, and lending. While it is difficult to correctly quantify the amount of ESG related investing or financing, by any metric, it has grown exponentially in recent years and is expected to continue its incredible growth in the next decade. As companies have increased their ESG investing, they have likewise looked to both traditional and alternative financing sources to provide capital for investments. Consequently, ESG and Green Lending have likewise grown exponentially. This article will discuss the history and current trends of ESG with a focus on ESG financing structures and considerations for lenders and borrowers looking to utilize an ESG facility.
November 6, 202100796198, Byron F. Egan
Audit Response Letters and Reserve Issues
The Sarbanes-Oxley Act of 2002 (H.R. 3763) (“SOX”) was enacted as a means to protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws. SOX and the rules enacted thereafter affect how issuers of securities make disclosures, the protocols auditors use to audit their financial statements, and how lawyers respond to auditor requests for information regarding issuer loss contingencies. Among other things, SOX amended the Securities Exchange Act of 1934 (the “1934 Act”) and the Securities Act of 1933 (the “1933 Act”). Although SOX does have some specific provisions, and generally establishes some important public policy changes, it has been implemented in large part through rules adopted and to be adopted by the Securities and Exchange Commission (“SEC”) and the Public Company Accounting Oversight Board (“PCAOB”), which have impacted auditing standards and have increased scrutiny on auditors’ independence and procedures to verify company financial statement positions and representations. Further, while SOX is by its terms generally applicable only to public companies, its principles are being applied by the marketplace to privately held companies and nonprofit entities.
November 7, 2019F. Daniel Knight
Greed - For Lack of a Better Word - Is(n't) Good
Alexis de Tocqueville famously said of lawyers in his ovular work "Democracy in America" that he could not “believe a republic could exist if the influence of lawyers in public business did not increase in proportion to the power of the people". What defines our profession today? Is it a pursuit of justice? Is it the concept of fairness? Is it equality under the law? Most non-lawyers could possibly say that one word defines our profession – Greed. Ours is not an easy profession. Use of the guideposts provided to us by the law, our State Bar of Texas, and, frankly, common sense can help us to avoid the pitfalls. It can help us to do our jobs in a professional and ethical manner while striving to provide high quality legal services. Most importantly, it can help us to sleep easy at night.
March 15, 2018Brad L. Whitlock
Equity Ownership, Fiduciary Duties and Exit Procedures: Some Things To Consider When Dealing With the Departing Employee
Even under the best circumstances, dealing with the departure of a key employee is never easy. If the departure was unexpected or is otherwise acrimonious, the situation can be even more difficult. This paper discusses a few elements to be considered when a valued employee is unexpectedly leaving a business and focuses specifically on equity ownership issues, possible fiduciary duty concerns, and procedures to follow in connection with the employee’s departure.
May 18, 2017Byron F. Egan
Choice of Entity and Acquisition Structure Decision Tree
These are the presentation slides.
March 10, 2017David P. Dunning, Douglas K. Moll
Differences in Drafting for Majority, Minority and 50/50 Owners in an LLC
Drafting the organizational documents for a business entity with multiple owners with differing interests is rarely “simple and straightforward”. Careful consideration needs to be given to the specific nature of the business arrangement, the ownership level of each owner, and what talents and resources each owner is bringing to the table in order to put together organizational documents that protect the key areas of concern for a client.
November 18, 2016Soren Lindstrom, Lindsey Reighard
How To Effectively Deal With Minority Shareholders: Some Practice Pointers And Recent Developments
Minority shareholders, or shareholders who own less than 50% of the outstanding voting interests of a company, are typically shareholders of companies backed by venture capital and are often a key source of venture capital funding, particularly in the early stages of venture capital transactions. Although venture capital funding has generally declined in the United States during 2016, with approximately $39 billion invested during the first three quarters of 2016 as compared to approximately $48 billion invested during the relative period in 2015, the U.S. venture capital market is expected to rebound at the end of 2016 or in early 2017. When seeking out minority shareholders to invest in VC-backed companies, majority shareholders should carefully consider a number of important protections and exit strategies commonly associated with minority investments.
November 21, 2015Byron F. Egan
Choice of Entity Decision Tree
These are the presentation slides.
May 25, 2013Adrienne Randle Bond
Legal Opinions on LLC's
As the use of the limited liability company (“LLC”) has significantly expanded, the bar has been required to examine and refine its customs and practices in the giving of closing opinions for LLCs. Historically, the preponderance of entities participating in financing or acquisition transactions was corporations. The swell of LLC formation, however, has outstripped the historical corporate practice, and LLCs are now the common entity used. Because of the several fundamental differences between LLCs and corporations, it stands to reason that traditional “corporate” legal closing opinions must be reconfigured to meet the specific characteristics of an LLC. One cannot simple perform a “global search” and replace “corporation” with “company.” The form of legal opinion for LLCs must be substantially rewritten, and the underlying due diligence tasks to give the opinion must be redefined. Even the topics that are required to be discussed in a legal opinion must be reformulated from the traditional corporate formulations. I plan to cover two areas: general legal principles that are invoked in the preparation and delivery of a closing opinion, and specific opinion provisions for the core opinions that are generally given about an entity in a financing or acquisition transaction. General principles have been affected by the expanded use of LLCs because the general principles depend on customary practices from corporate practice, and customary practices have been adapted to the unique features of an LLC. Further, the Bar has developed new and more precise diction with respect to the actual language used in the traditional core opinions given.
November 8, 2013Byron F. Egan
Misbehaving Directors, Including Directors' Duties to Maintain the Confidentiality of Information
The conduct of corporate directors and officers is subject to particular scrutiny in the context of business combinations (whether friendly or hostile), executive compensation and other affiliated party transactions, allegations of illegal or improper corporate conduct, and corporate insolvency. The individuals who serve in leadership roles for corporations are fiduciaries in relation to the corporation and its owners. Increasingly the courts are applying principals articulated in cases involving mergers and acquisitions (“M&A”) to cases involving executive compensation, perhaps because both areas often involve conflicts of interest and self-dealing or because in Delaware, where many of the cases are tried, the same judges are writing significant opinions in both areas. Director and officer fiduciary duties are generally owed to the corporation and its shareholders, but when the corporation is insolvent, the constituencies claiming to be beneficiaries of those duties expand to include the entity’s creditors.
November 8, 2013F. Eric Fryar, Christina Richardson, Caitlin B. Feste, Rusty Sewell
Shareholder Oppression: Is It a Cause of Action?
In troubled economic times, the temptation to exercise power over business partners can be overwhelming—whether borne out of greed, a sense of entitlement, or even a perceived need for self-preservation. This article deals with the rights of individual shareholders in closely held corporations. This is an area that is poorly developed in Texas law and plagued with apparent contradictions in the dicta. The most common case arising out of the abuse of corporate powers has to do with officers or directors using their power to steal from the corporation (and thus from the shareholders as a group). Shareholders often bring these cases, and a very common result is the dismissal of the lawsuit because the duties violated are owed to the corporation and not to the shareholders individually. Several Texas cases seem to suggest that there are no (or at least very few) duties owed to shareholders individually. In recent years, individual shareholders have been prevailing in lawsuits asserting claims for shareholder oppression—claims based on duties owed to the shareholders individually. In this article, we will explore the basis of these claims. We will not deal with the closely related issue of derivative suits or with duties owed by officers and directors to corporations.
November 2, 2012Stephanie L. Chandler
Are You Prepared for Anonymous? Addressing Cybersecurity Risk
Assuring cybersecurity has become a necessity for businesses across all industries. Cybercrime — with over $1 trillion in annual revenues— is now the largest illegal global business. Any business with computers and internet access is vulnerable not only from outsiders waiting to pounce but also from within the enterprise as a result of human error or bad intentions. Given the size of this problem, it is not surprising that the National Association of Corporate Directors has stated that to make real progress in the cybersecurity area, businesses must treat cybersecurity as a matter of “corporate best practices” and not just a technology issue. Companies face the risk of substantial damage from loss of customer confidence, decrease in market value and damage to their reputations as well as litigation and regulatory risks in the event of a cybersecurity breach. With October, Cybersecurity Awareness Month sponsored by the Department of Homeland Security, just drawing to a close now may be the perfect time for you to refocus on whether your business has adequately planned for the security of its assets.
May 28, 2011William H. Hornberger
Choice of Entity How to Choose What Entity or Acquisition to Use
This outline discusses certain relevant federal income and Texas state tax considerations relating to the selection of an entity for engaging in business or investment.
October 22, 2010Byron F. Egan
Duties of Owners and Governing Persons Among Different Types of Entities
The concepts that underlie the fiduciary duties of corporate directors have their origins in English common law of both trusts and agency from over two hundred years ago. The current concepts of those duties in both Texas and Delaware are still largely matters of evolving common law.
October 22, 2010Byron F. Egan
Merger & Acquisitions
Buying or selling a business in Texas, including the purchase of a division or a subsidiary, revolves around a purchase agreement between the buyer and the selling entity and sometimes its owners. Purchases of assets are characterized by the acquisition by the buyer of specified assets from an entity, which may or may not represent all or substantially all of its assets, and the assumption by the buyer of specified liabilities of the seller, which typically do not represent all of the liabilities of the seller. When the parties choose to structure an acquisition as an asset purchase, there are unique drafting and negotiating issues regarding the specification of which assets and liabilities are transferred to the buyer, as well as the representations, closing conditions, indemnification and other provisions essential to memorializing the bargain reached by the parties. There are also statutory (e.g., bulk sales and fraudulent transfer statutes) and common law issues (e.g., de facto merger and other successor liability theories) unique to asset purchase transactions that could result in an asset purchaser being held liable for liabilities of the seller which it did not agree to assume.
May 28, 2010Byron F. Egan
Choice of Entity Alternatives
In the 81st Session of the Texas Legislature (the “2009 Legislative Session”), which convened on January 13, 2009 and adjourned sine die June 1, 2009, changes were made to the Texas statutes that govern and tax business entities. These changes affected the following five business entity forms: Corporation; General Partnership; Limited Partnership; Limited Liability Partnership (“LLP”); and Limited Liability Company (“LLC”). These changes may affect the form of business entity most advantageous in a particular situation. In most situations, the choice of entity focus will be on how the entity and its owners will be taxed and the extent to which the entity will shield the owners of the business from liabilities arising out of its activities. Appendix A at the back of this paper is an Entity Comparison Chart that compares key characteristics of the available Texas business entities, and Appendix B compares the tax attributes of the respective entities.
May 22, 2009Byron F. Egan
Director Duties in Troubles Times: Process and Proof
The conduct of corporate directors and officers in Texas is subject to particular scrutiny in the context of executive compensation and other affiliated party transactions, business combinations, whether friendly or hostile, and when the corporation is charged with illegal conduct. The high profile stories of how much corporations are paying their chief executive officer (“CEO”) and other executives, corporate scandals, bankruptcies and related developments have further focused attention on how directors and officers discharge their duties, and have caused much reexamination of how corporations are governed and how they relate to their shareholders. The individuals who serve in leadership roles for corporations are fiduciaries in relation to the corporation and its owners. These troubled times make it appropriate to focus upon the fiduciary and other duties of directors and officers, including their duties of care, loyalty and oversight. Increasingly the courts are applying principals articulated in cases involving mergers and acquisitions (“M&A”) to cases involving executive compensation, perhaps because both areas often involve conflicts of interest and self-dealing or because in Delaware, where many of the cases are tried, the same judges are writing significant opinions in both areas. Director and officer fiduciary duties are generally owed to the corporation and its shareholders, but when the corporation is on the penumbra of insolvency, the beneficiaries of those duties may begin to expand to include the creditors.
October 17, 2014Byron F. Egan
Joint Venture Critical Issues: Formation, Governance, Competition and Exits
This paper, prepared for the UT Law CLE 10th Annual Mergers and Acquisitions Institute in Dallas on October 16, 2014, contains information to consider in structuring, negotiating, executing and exiting a joint venture. Guidance is provided regarding choosing the form of joint venture entity and drafting documents for its governance, operations and eventual termination. Critical provisions of preliminary and definitive documents for joint ventures are provided. Included is a discussion of the Energy Transfer Partners, L.P. vs. Enterprise Product Partners, L.P. case in which a $535 million judgment was entered against a partner which left a venture to enter into another before definitive documents were signed, and notwithstanding preliminary agreements which said that no party was bound until definitive documents were signed, because of the conduct of the parties led to a finding that a partnership had been formed. Attached is a brochure for this Mergers and Acquisitions Institute, which includes nationally recognized experts in M&A.