R3M Law, LLPNYC Commercial Law, Litigation and Bankruptcy Attorneys | Manhattan2023-10-31T13:03:48Zhttps://www.r3mlaw.com/feed/atom/WordPress/wp-content/uploads/sites/1201405/2020/02/cropped-favicon-32x32.pngOn Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=498642023-04-17T06:34:00Z2022-09-28T14:16:57Zsales process work?
The sales process
Selling assets as part of a Chapter 11 bankruptcy case is a four-step process:
Debtor markets assets to potential buyers
Debtor files motion with the bankruptcy court
Bankruptcy court approves sale of assets
Assets sold to winning bidder
Benefits of selling assets
Selling assets provides debtors a way to maximize the amount of money received by utilizing a bidding process. Additionally, buyers are more willing to purchase in this format, because it allows them to acquire title free and clear of liens and claims, and protects good faith buyers from reversal of the sale. Secured creditors have the option to place a bid on collateral sold that cancels some or all of the debt owed to the creditor.
Limitations of selling assets
All sellers must conduct sales according to the requirements of the bankruptcy code or the court will not approve the sale. If the court decides a sale was not conducted in good faith, the court may reverse the sale and the debtor will have to conduct the sale again.
Selling assets as part of a Chapter 11 bankruptcy provides companies with an opportunity to settle debts. However, debtors must take care to conduct sales correctly. A bankruptcy attorney may be able to help ensure that all sales comply with the requirements of the bankruptcy code.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=498482023-04-17T06:34:08Z2021-07-28T15:29:26Zbusiness partnership to evolve over time. Disputes may be common, but they don’t have to be the accepted norm.
Consider this before going into business together
Projected profits appear attractive for entrepreneurs eager to reap the rewards of their labor, although bringing a project to fruition is virtually impossible to do on your own. So, how can you balance the need to involve others in your project with the perceived sacrifices involved?
Check your ego. No matter the scope of your previous business experience or the amount of capital you are prepared to put at risk, a team approach requires an openness to your partners’ ideas, opinions and experience which may be significantly different from yours. Sharing risk and reward comes hand-in-hand with the responsibility to do what’s right for the enterprise. Research potential business partners before committing yourself to any contractual arrangement. Proper diligence of any potential partner is a must. Better to find out and then deal with any negative information before you commit to a potential partner and place yourself in a position of risk.
Personal versus business. Entering into a business relationship with someone with whom you already have a personal relationship may seem, in the first instance, to be the best way to create a business. However, before you do, you should carefully think through the potential ramifications. For example:
Is the decision based on personal loyalty or on demonstrated business acumen? Is the value of any potential contribution outweighed by the potential negative impact on the relationship? Would you be prepared to destroy that relationship if the survival of the enterprise required you to do that?
Do you value the personal relationship more than any potential business outcome or your own personal success? The unfortunate reality is that many partnerships fail to survive the commitment involved in operating a successful business. Would your personal relationship suffer if the business failed and is that worth the risk?
How would you divide responsibilities? A comprehensive written agreement must be put in place to establish the roles, duties and responsibilities necessary for the successful operation of the business. The absence of such a detailed contractual framework only serves to increase the likelihood of resentment, discord and disputes when one person feels that he or she is carrying more of the burden than someone else or is not being properly rewarded for his or her efforts.
Shared vision. Agreement about time commitments and financial commitments should align with long-term organizational goals.
Collaborative efforts must leave room for individual personalities and thought processes. That said, there is no better way to mitigate risk when forming a partnership than for the parties to have a comprehensive written agreement.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=490402023-04-17T06:34:18Z2020-12-08T21:15:53ZLower interest rates, preventing bankruptcy
Business continuity is essential, and with a debt restructuring, you can minimize the squeeze from severe financial constraints. Your debt will not go away, however revising the terms of the loan agreements will help you. Here are some crucial benefits from reconstructing debt:
Business cash flow improves: As a result of the restructuring, cash flow improves because not as much goes to pay off debt. Now you have a bit more money on hand for your company to focus on business operations and secure additional revenue.
The prevention of bankruptcy: Closing your business is the last thing you want to do. Restructuring allows you to now pay manageable interest rates while getting a second wind for your business.
Securing much-needed lower interest rates: Many lenders want to see you succeed and keep the business running. They know what your company has successfully done in the past. Lower rates equate to lower monthly payments and less debt-related burden.
Crucial aspects are deciding which debt to restructure, understanding the amount that your company can realistically pay and skillfully negotiating a manageable and workable repayment plan. These moves can help your business survive situations like the current economic downturn.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=490242023-04-17T06:34:32Z2020-08-31T13:02:05ZWhat details should you investigate?
You should examine many different categories of items when investigating a business. There is no one size fits all. Here are a few of those categories:
Documents about the company and its structure – From the company’s organizational documents and corporate organization chart to updated minutes from the meetings of its governing body, understanding a company’s structure and internal governance level proceedings can give you a high-level understanding of its operations.
The Company’s Assets – Assets that a company holds like real estate, manufacturing equipment and intellectual property including domain names, form the core of the company’s economic value, regardless of whether the ultimate transaction consists of a purchase of the company’s equity or the sale of all or substantially all of its assets. You should also examine those assets closely. The condition of real property (whether owned or leased), the age and condition of manufacturing equipment, and the expiration dates of intellectual property protections can limit the value these assets offer. Real property leases need to be examined to determine whether a sale of the company triggers the need to obtain the consent of any individual landlord.
Financial information – One of the most appealing aspects of a company may be its profit potential, and financial information can give you a clear picture of that profitability. However, it is important to get updated information to ensure that you understand the company’s current finances. Footnotes to financial statements can raise significant questions the need to be answered as part of your due diligence investigation.
Contracts – What contracts are there with customers, vendors and suppliers? Which contracts are material to the value of the company and its continued operations? Do any of those contracts need to be assigned and, if so, does consent of the contract counterparties to the assignment need to be obtained? Does the business depend on a supply chain? What steps have been taken to assure that the supply chain remains uninterrupted both before and after the company is acquired?
Employee information – What does the company’s workforce look like? What benefits has the company promised employees? Did the company recently lose employees in key positions? Are some or all of the company’s employees unionized? Do any of the employees have employment contracts that contain severance benefits if those contracts are terminated? A company’s employees are an important asset, and you should consider them when evaluating a company.
Licenses and permits – Is the company’s licensure up to date? Which licenses are integral to the continued operation of the business? Are any licenses so integral that the form of the purchase transaction needs to be structured as a sale of the company’s equity rather than as a sale of its assets? In the case of a sale of the company’s assets, what steps need to be taken to acquire replacement licenses and what is the timing to obtain those licenses? In the case of a sale of the company’s equity, is any licensing authority entitled to approve a change of control? Does the company have the permits and authorizations needed in order to do business wherever it operates? When will critical licenses expire and what is the renewal process?
Insurance – Insurance is a key element of every business. You will need to review with your insurance consultant the proper forms of coverage and amounts, exclusions and deductibles. Cyber insurance is extremely important, especially for customer facing businesses.
Litigation – You need to know whether any litigation is pending or threatened against the company and to evaluate whether any litigation, or threat of litigation, is a risk that you are unwilling to accept.
Security – Especially for businesses that handle sensitive information or have intellectual property assets that need to be protected, you should examine the security used to protect that information and those assets. As All Business notes, this should include reviewing any privacy and cybersecurity risks that the business may face based on the business’s market.
Performing due diligence is an essential way for you to ensure that the business you purchase is the business you thought you were purchasing when you first engaged with the seller.
It is important to work with an experienced attorney to guide you through the evolving process of your due diligence investigation and through the negotiation and closing of a purchase contract that reflects a transaction that is acceptable to you and that successfully reflects your goals.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=490082023-04-17T06:34:43Z2020-06-24T20:50:57ZPartnership agreement:
The contract must first outline what are the general duties and expectations of each of the parties. The information that should be displayed in the contract is:
The name of the partnership
Purpose of the business
Names and addresses of the partners
Capital and contributions of each partner
Interest and ownership
Management
What to do when a partner chooses to withdrawal
Dissolution
What to include:
Out of the list mentioned about, it is important to highlight a few that are considered to be vital for the creation of any partnership agreement.
Decision-making: How will the partners make decisions? Will it be through a voting process or will one partner be solely responsible for that?
Capital contribution: Basically, what is addressed is how much money will each party invest in the business.
Salaries and distributions: It address when will the partners take money from the account and how will they use that money. Will they use it to invest or to purchase things for the business?
Death or disability: Partners must discuss what will happen to either one of them if they die or if they suffer a disability. What will happen to the company? What will happen to their shares?
Dissolution: What exit strategies are available when the partnership ceases to exist? This is possibly the most uncomfortable to talk about yet essential if one of the partners does not want to be involved in the business anymore.
Knowing this information is key to understanding the role of partnership agreements and how they can be formed to better aid the purpose of the business venture.
]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=488932023-04-17T06:34:52Z2020-05-18T18:54:55ZIt is easy to undermine your own negotiations. You may make mistakes in your strategy. You may lack experience. As a result, you may not realize what is happening until it is too late.It is difficult to identify potential issues and lessen their impact on a business deal. Yet it is the key to negotiating an agreement that benefits your company.Build a better relationshipThe idea is not to defeat your opponent at the negotiating table. An "us versus them" approach puts you at odds rather than working together toward a deal.As an entrepreneur, you focus on yourself, your company and your interests, but in negotiations, you must consider other parties. What do they want? How can you make an offer that benefits all sides?Your goal is to answer these questions. By making them part of your negotiating strategy, you become partners. As a result, you are working toward the same goals.Build a better youSometimes, you may become your own biggest obstacle to a successful deal. Recognizing your shortcomings is an important part of any negotiation. Do you rely on intuition and emotion rather than facts? Do you negotiate on your own rather than enlisting the help of others? These approaches may serve you well in other parts of your business, yet not so much in negotiating.Some entrepreneurs have too much confidence in their own abilities. While you have many skills, deal-making may not be one of them. Negotiating a deal is complex and comes with major consequences for your business. This is where having a backup plan comes in. You never know when something might go wrong.Build a better futureEntrepreneurs like to get things done. This can work against you if you accept a bad compromise. The characteristics that make you successful can work against you. You may "know" you are doing the right thing, but you may be wrong. Take time to review your options.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=488312023-04-17T06:35:00Z2020-03-12T18:40:20ZMergers and acquisitions are both types of complex business transactions in which two companies come together as one. On the surface, a merger and acquisition can seem very similar to one another, so much so that people often use the terms merger and acquisition interchangeably or combine them when talking about complex business transactions.However, while the end result is often similar, the process by which each takes place can be different. Here is an explanation of what each of the terms means, as well as recent examples of each.AcquisitionAn acquisition is more aggressive than a merger. It involves one company taking control of another by purchasing at least a majority of the other company's shares. The end result is that the target company no longer exists, and the purchasing company takes over its management decision-making and operations.This may sound like a hostile process, and it can be. However, sometimes the target company is receptive to the purchase and cooperates with the process. Nevertheless, it is ultimately the purchasing company that has absolute power over the transaction.Examples of recent acquisitions include Google's acquisition of Android in 2005 and Disney's acquisition of Marvel Entertainment in 2009.MergerA merger is a mutual decision by two companies to join together. The goal is to form an entirely new entity that, in theory, will be greater than the sum of its parts.A merger is a more cooperative process than an acquisition. Though the balance of power between the new merging companies is not necessarily equal, it is usually more even than it is in an acquisition. In an acquisition, one company completely subsumes the other. In a merger, neither company exists in its previous form, but elements of each carry over into the new company.One of the most recent and most well-publicized examples of a merger occurred between 21st Century Fox and Disney within the last couple of years. Another recent example was the merger between Instagram and Facebook in 2012.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=483472023-04-17T06:35:12Z2020-02-24T21:57:33Zresolve your disagreements, you may have to end the partnership altogether. Here are four common sources of partnership disputes you may encounter:
Financial friction
When there is plenty of cash, partners tend to be happy with financial matters. If your venture enters a downturn, though, financial arguments may arise. These often happen when partners cannot agree about distributing profits and losses. They may also occur if a partner uses company resources for personal purposes.
Undefined boundaries
Robert Frost famously wrote, “good fences make good neighbors,” about the importance of healthy boundaries. Unfortunately, though, business partners often forget this lesson. To decrease disputes within your organization, you should have clearly defined roles.
Misused resources
For your organization to succeed, you must retain existing customers while attracting new ones. Still, you and your business partners may strongly disagree about how to accomplish this objective. If a partner believes someone is squandering resources on unnecessary endeavors or frivolous purchases, you may have a serious disagreement to address.
Personality conflicts
Finally, it is important to realize that personality conflicts can arise in any business organization. These may be due to human nature or fundamental differences in business philosophy. Nonetheless, if you do not manage these conflicts, your organization may suffer.
In partnerships, disputes happen for many different reasons. Fortunately, there are a number of ways to resolve partnership conflict. Understanding why disputes often arise is typically the first step in quieting them.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=483502023-04-17T06:35:21Z2020-01-29T16:39:23Zhandle any business disagreement.
This is only true until it is not. The family bond does not always triumph. Any business venture, regardless of whether the parties are family members, needs a strong written contractual foundation, which has been fully negotiated and with respect to which each of the parties has been represented by their own counsel.
Why family businesses struggle in particular
Most business partners struggle occasionally. When it comes to an equal partnership, internal disputes can happen. This does not mean that it is the end of the business, but it does mean that each partner must protect his or her own interests.
If you take business disputes at face value, family businesses look exactly like any other business. The disagreements may include:
Disagreements over job responsibilities and the adequacy of compensation
Disagreements about risk-taking strategies
The assignment of responsibility for business mistakes
Disagreements over future leadership
What can make a family business more volatile is that emotions can go unchecked. When family members fight, the results can be corrosive, especially if the parties have not established in writing at the outset the method for dealing with a particular type of dispute or disputes in general. Whenever a dispute arises, you may feel betrayed by a loved one. Disagreements that go unchecked can destroy a family business. They can destroy trust.
How families can recover and move forward
There are a variety of ways to save your business and limit the damage to your family relationships. First, think beyond short-term goals. Yes, your first instinct may be to prevail in the dispute at any cost. But you also need to take into account the long-term success of the business and the preservation of a healthy family dynamic. Negotiations between two family members can be more effective if neither makes it his or her goal to completely vanquish the other. If the parties are unable to negotiate a successful resolution of the dispute by themselves, then resorting to mediation or another type of dispute resolution is generally a better next step than resorting directly to litigation.
Ultimately, the key to the successful resolution of disputes, or avoiding them in the first instance, is to have a well drafted set of corporate agreements that clearly articulate the rights and responsibilities of all parties and an agreed methodology for the resolution of disputes.
And, when there do happen to be disputes, family relationships are best preserved if all involved are able to conclude that the resolution of the dispute in question has been accomplished in a manner consistent with the agreements that the family members put in place when they launched their business venture.]]>On Behalf of R3M Law, LLPhttps://www.r3mlaw.com/?p=480352023-04-17T06:35:32Z2019-12-19T18:26:12Zplain English so that both parties have a clear understanding of what they are agreeing to before they sign. In other words, your contracts should say what you mean and mean what you say.
Specificity
Your contracts should consist of consecutively numbered paragraphs, with each paragraph sufficiently addressing a specific provision of the contract. If one paragraph is insufficient to set forth all the pertinent details as to each party’s rights and obligations, consider dividing your contracts into sections by topic.
Payment details
Many commercial contracts involve agreements about one party providing goods and/or services to the other in exchange for the recipient paying for such goods and/or services. Make sure your contracts spell out in specific detail which of you will provide what — and when — and how and when the other party will pay for it.
Additional considerations
Depending on the nature of your contract and the party with whom you contract, you may also need to consider adding the following:
Confidentiality clause whereby the other party cannot disclose to anyone else whatever knowledge (s)he gains about your business or trade secrets
Clause regarding how the contract will end
Clause regarding arbitration in the event of a later dispute that you and the other party have agreed to arbitrate rather than to litigate
Clause regarding which state’s laws will apply in the event of a later dispute or legal proceeding
Clause regarding an award of reasonable attorneys’ fees and litigation costs to the winning party in a later legal action
Unfortunately, no matter how careful you and your attorney are, few if any contracts are airtight if the other party or parties later want to dispute them. However, the more understandable and detailed you make your contracts, the less likely it is that you will have a dispute arise in the future.]]>