Fiduciary Duties: Legal Obligations or Investors’ Imaginary Friends?

Founded in 1983, is the world’s largest family history website that provides access to more than ten billion records and thirty eight million family trees.[i] Recently, the London based private equity firm Permira Advisers LLP agreed to purchase the company at a valuation of $32 a share.[ii] The $32 amount represents a premium of 10% based on the company’s price at the time the deal was announced. [iii] However, many shareholders are unsatisfied and upset.[iv] In fact, many shareholders have filed suit against the company.[v]  Principally, these suits allege that the Board of Directors of breached their fiduciary duties to stockholders by failing to obtain a higher price by adequately shopping the company and that the decision to consummate the sale was not in the best interest of shareholders, rather that of the Board of Directors.[vi]

Attorneys representing pension funds and shareholders Read the rest

Non-Lawyers Owning Law Firms

Associate classes are smaller. Partners are leaving firms. Equity partnerships are off the table for promoted associates. Mid-size firms only want laterals. Law firm hiring is not looking great these days. As the recession wages on law firms, and clients for that matter, are tightening up. Firms don’t have the work available to hire new associates. For the associates there, firms can’t afford to provide partnership, let alone equity partnership. Perhaps part of the problem is the model by which law firms have operated. Unlike most other businesses (and the practice of law for-profit is as much a business as anything else), law firms are not open for outside ownership and investment. Rather firms’ own principals are their owners. With dwindling work, it stands to reason new equity partners might not see returns on their initial investments, hence limitations on equity partnerships. Outside of America, other countries like England and Read the rest

Why Lawyers Should Know More About Antitrust Regulations

I.                    Introduction     

     Antitrust law is usually understood as applying to companies and their products. The incentives for assuring competition among companies have not limited the function of antitrust law. Antitrust law has developed its application to beyond those players in the market. Now, lawyers and bar associations also have to watch out for antitrust regulation. The American Bar Association has been under pressure to lighten up several of its rules in order to allow multidisciplinary firms to evolve.[1]      

     The application of antitrust law to lawyers will be discussed in this article. Part I discusses if the definition of “trade” applies to professional services for the purpose of antitrust regulation. Is the discussion of regulation related to horizontal agreements or legislation? If it is legislation (for example, laws establishing bar associations), it is out of the scope of antitrust law. Read the rest

Liability Protection: The Keystone of a Successful Business

I. Introduction

For an entrepreneur, starting a new business can be a fulfilling
venture. However, if the company and its assets are not properly
protected, the risks that come along with such an endeavor can prove to
be costly. This article will first discuss the agency issues that arise
in a litigious society. It will then explain the process for retaining
liability insurance. Finally, it will conclude by suggesting some
simple ways a new business owner can ensure he or she will receive
maximum liability protection.

II. Agency Issues

Agency law issues often arise when an employee takes action on
behalf of the company without the employer's consent or the proper
authority. [1] The Restatement of the Law (Third) Agency defines agency
as, "[t]he fiduciary relationship that arises when one person manifests
assents to another person that the agent shall act on the principal's
behalf and subject to the principal's … Read the rest

Labor and Employment in the Workplace: A Hiring and Workplace Guide for New Business Owners

I. Introduction

The process of starting a business that relies on outside employees
is time consuming and often confusing. However, with the aid of a
qualified attorney and the implementation of the proper procedures, an
entrepreneur may be able to safeguard himself against many of the risks
of bringing other people on board while reaping the benefits. This
article will first discuss the basics of hiring a qualified employee
and suggest an organization for a family run business. It will then
discuss the implications of non-compete agreements, existence of trade
secrets, and creation of pension plans. Finally, it will conclude by
discussing the implications of retaining an attorney to aid in the
employee hiring process.

II. The Initial Hiring Process

There are a few basic issues every employer should be aware of
before beginning the hiring process. [1] "Unless your business is a
'one-man show,' there are a wide variety … Read the rest

The Art of Registering a Business: Picking the Right Method of Registration for Your New Business

I. Introduction

Starting a new business can be a scary venture for a new
entrepreneur. Beyond picking a location, hiring personnel and
establishing a clientele base, deciding how to register the business
can be an important decision with lasting implications. There are five
main categories under which a new business owner can register his or
her new business: sole proprietorship, general partnership, limited
liability partnership, limited liability company or corporation. This
article discusses the pros and cons of registering under each of the
five categories and the legal implications of each option.

II. Sole Proprietorship: Description, Liability, Tax Benefits

A sole proprietorship is the most common type of business
organization. [1] In a sole proprietorship, one person owns and manages
the business and there is no separation between the business entity and
the individual, meaning for tax purposes the individual must file only
one individual tax return. [2] The advantages … Read the rest

Imposing Fiduciary Duties on Political Partnerships

In a change from the ordinary politics of promoting the supremacy of one party platform over another, this past campaign season aspiring candidates promised bi-partisan cooperation on several key issues.  It is interesting to think, though, of what these candidates meant by “cooperation.”  Analogizing the promised cooperation to a legal partnership framework, candidates could be interpreted to have campaigned to form bi-partisan political partnerships under which they would owe fiduciary duties of loyalty and care to their political foes.  While cooperating under a duty of loyalty and care may sound appalling to the newly elected candidates, imposing legal-inspired fiduciary duties on political partnerships could benefit the American economic and political landscape. 

As a brief review of fiduciary duties, the Revised Uniform Partnership Act (RUPA) requires that a partner owes to the partnership and the other partners the duty of loyalty and the duty of care.[1]  The duty of care encompasses

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Could the Rule Against Pro Se Representation be a Problem for Single-Member LLCs?

Limited liability companies (LLCs) enjoy unique hybrid status as a “relatively new form of doing business that is created and defined by state law.”[1]  Though the LLC is “not formally characterized”[2] as either a partnership or a corporation, but as a hybrid entity, problems occur when precedent addresses partnerships or corporations, but not LLCs directly.  When the law fails to address LLCs specifically, judges and commentators analyze the law and determine whether an LLC should be grouped as a corporation or a partnership for a specific purpose.  For example, bankruptcy laws do not refer specifically to LLCs, yet LLCs can still be debtors or creditors.[3]  Generally speaking, “LLCs have been treated as corporations almost by default for bankruptcy purposes.”[4]  However, placing LLCs into default corporate categories may not always effectively serve the goals of an LLC.   In particular, this article addresses a current interpretive problem existing in the characterization of

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Ford-GM Merger/Alliance Talks: Bigger is Not Necessarily Better

Automotive News recently reported that General Motors Corp. and Ford Motor Co. have discussed a possible merger or alliance.[1]  Neither company will comment on the talks [2], leading some followers to believe the reports are mere "speculation" and reflect "[n]ostalgia for the glory days of the American automobile industry."[3]  Nostalgia and speculation aside, the merger/alliance rumors are enough to incite the interests of industry followers and American car buyers as to the possible benefits of such a relationship.

A merger would combine "two of the world's most recognized brands."[4]  The combined company would account for "an astounding 41 percent of the U.S. auto market."[5]  An alliance could force innovative thought and encourage novel business decisions, as it seems to some that "[t]he old school way of doing things at Ford and GM isn't working."[6]  If nothing else, a merger would combine name recognition and product lines.  However, the merger process

Read the rest