June 18, 2015

Inside Business Law

The Business Law Section provides a wealth of free “content” to its members throughout the year. That content is created by the Section’s Committees and their members, including individuals who participate in Committee webinars or contribute articles for Committee newsletters and the Section’s print publications – Business Law Today and The Business Lawyer – and authors of books published by the Section.

The Section’s new “Content Corner” provides links to the most recent issue of Business Law Today, the online version of the most recent edition of The Business Lawyer, recent Committee newsletters and webinars, and the latest In The Know and Business Law Basics CLE programs, as well as recent books published by the Section.

Some of the Section’s most recent content is highlighted below.

Business Law Basics CLE Web Series

Business Law Basics is a new program featuring monthly web-based CLE programs, covering the key fundamentals of substantive practice areas, for which Business Law Section members earn free business law CLE. The Business Law Basics Subcommittee (of the Membership Committee), chaired by James C. Schulwolf, coordinates the Business Law Basics programs.

The next Business Law Basics webinar is:

Forming LLCs – Using the World’s Best Checklist
Date: June 25, 2015, 1:00 p.m. – 2:30 p.m. Eastern
Presented by: LLCs, Partnerships and Unincorporated Entities Committee

Every deal is different, and for that reason every limited liability company is different. The lawyer preparing the LLC’s operating agreement must be able to reflect the business deal as well as be sure that the operating agreement fills in the gaps in the parties’ express agreement. The panel, which includes the co-chair and drafters of the Model LLC Operating Agreement Checklist, will explore how the Checklist can assist practitioners in drafting better LLC operating agreements that are consistent and comprehensive.

The panelists on this program are Tom Rutledge, Stoll Keenon Ogden, Louisville, KY; Laura D’Angelo, Dinsmore, Lexington, KY; Dan Kleinberger, Williams Mitchell College of Law, St. Paul, MN; Christina Houston, DLA Piper, Wilmington, DE; and David Tingstad, Beresford Booth PLLC, Edmonds, WA.

Recent Committee Newsletters

Several Committees have recently published newsletters. Some highlights from a few of the newsletters, and a link to each, are described below.

Mergers and Acquisitions Committee – Among other things, the Spring issue of the Committee’s newsletter, Deal Points, contains two feature articles and numerous reports from the Committee’s various Task Forces and Subcommittees. In “New Regulations Will Shake Up The M&A Escrow Landscape,” Paul Koenig writes about how new U.S. federal and European Central Bank regulations, designed to mitigate the systemic risks of the financial industry and which will take effect over the next 18 months, present challenges to the transaction parties in setting up M&A escrows. He notes that under the new rules, M&A parties may soon find that traditional escrow options – deposit accounts at commercial banks and money market funds – may no longer meet their investment criteria or, in some case, be available. Because the fundamental reasons for choosing these investment alternatives for M&A escrows – principal protection and liquidity – can no longer be assured for those escrows with maturities beyond 2015, Paul cautions that M&A parties and their counsel will need to understand the changing landscape and reevaluate the alternatives for investing escrowed funds.

In the second featured article, “Proposed Amendments to Delaware Appraisal Statute Attempt to Curb, Not End, Appraisal Arbitrage,” Nicholas D. Mozal discusses the effectiveness of legislation currently pending in the Delaware legislature that is intended to curtail the practice of “appraisal arbitrage.” Stockholders of Delaware corporations who dissent in the acquisition of the corporation in a cash merger have the right to seek a judicial determination of the “fair value” of their shares. Nicholas discusses the trend by investment funds that purchase the corporation’s shares after the merger is announced with the goal of pursuing an appraisal action and a ruling that the “fair value” of the shares is above the merger price. He concludes that the proposed changes (allowing corporations to pay cash to petitioners before the entry of final judgment, thereby reducing the interest paid in connection with appraisal petitions, and requiring the Court of Chancery to dismiss petitions involving less than 1 percent of the outstanding shares of the case or series entitled to appraisal and where the value of the consideration to be paid for such shares in the merger or consolidation is less than $1 million) are unlikely to radically change the existing practice of appraisal arbitrage.

Deal Points is only available to members of the Mergers and Acquisitions Committee.

Nonprofit Organizations Committee – The Committee’s First Quarter 2015 newsletter includes information on the Committee’s meetings and programs at the Section Spring Meeting in San Francisco, as well as an interview with D’Ann Johnson of the Texas RioGrand Legal Aid, who talks about her career and the rewards and challenges of working with nonprofit organizations. Megan A. Christensen of Blank Rome LLP, Washington, DC, provides “National Updates” on tax matters, cases, and regulations affecting nonprofits, and Emily Chan, Adler & Colvin, San Francisco, CA, writes in “State Updates” about recent cases and regulatory initiatives relating to nonprofits in California, Oregon, Pennsylvania, and New York.

The Nonprofit Organizations Committee’s newsletter can be found here.

Private Equity and Venture Capital Committee – The April 2015 edition of the Committee newsletter includes four feature articles and reports from five Subcommittees. In “A Tale of Two Entities: Tax Considerations for Choosing the Proper Investment Vehicle – The Corporation and the LLC,” Jerome Schwartzman of Houlihan Lokey, New York, NY, discusses seven factors that, in his view, capture the primary tax-related considerations for helping practitioners advise their clients on the most appropriate legal entity for a new venture. Helen Reeves, of Frankfurt Kurnit Klein & Selz, P.C., writes in “Conversions of Limited Liability Companies to Corporations in the Contest of Venture Capital Financing: Practical Considerations & Drafting Issues,” that while founders of a venture elect to form an LLC to take advantage of the tax flexibility LLCs provide, professional investors often will condition their investment on the conversion of the entity from an LLC to a corporation. She outlines the business implications and drafting challenges practitioners may face when converting LLCs to corporations in the context of venture-capital fundraising.

In “Differences between UK and US Venture Capital Transactions,” two UK lawyers, Steve Wilson and Simon Jones of Osborne Clarke, note that although venture capital investments are essentially the same type of transaction in the US and the UK, certain elements and approaches are distinctly different and can often cause confusion or unnecessary dispute when applied across borders. The article provides a high level overview of some of the key differences between approaches to venture capital transactions in the two jurisdictions. Finally, Oliver Blum of CMS Switzerland, discusses recent case law that makes dividend recapitalization for Swiss private equity firms significantly more difficult in “Switerland: New Impediments for Dividend Recapitalization.”

The Private Equity and Venture Capital Committee’s newsletter can be found here.

Consumer Financial Services Committee – The Committee’s May 2015 newsletter includes a report on the Deposit and Payment Systems Subcommittee’s program at the Spring Meeting, and an article on the career of Richard Hackett, formerly with the Consumer Financial Protection Bureau (CFPB) and now at Hudson Cook LLP in Portland, ME, written by R. Scott Adams, of Spilman, Thomas & Battle, PLLC. In one of two “Legal Feature” articles, Richard Freshwater, of Thompson Hine, writes in “The Jesinsoki Decision Leaves More Questions than Answers for TILA Rescission Claims,” that the U.S. Supreme Court’s recent decision in Jesinoski v. Countrywide Home Loans, Inc., Case No. 13-684, 574 U.S. ___ (2015), leaves financial institutions and practitioners to face a number of difficult questions regarding how to handle TILA rescission notices, such as when to release the lender’s lien and whether to initiate litigation to protect the lender’s interest potential litigation received from borrowers.

In the second “Legal Feature” article, “Imminent Restrictions on Arbitration Provisions in Consumer Financial Contracts Foreshadowed by the CFPB’s Arbitration Study,” Amy Jonker of Dykema Gossett PLLC reports on the CFPB’s 728-page Arbitration Study, in which the CFPB concludes that arbitration agreements are detrimental to consumers. She writes that the Arbitration Study is expected to result in significant restrictions on the use of arbitration and class-action waivers in consumer contracts, especially for companies that operate retail-banking units, and a new wave of class action lawsuits. Jonker recommends that companies would be well-advised to maximize customer satisfaction, understand customers’ complaints and their financial impact, and resolve consumer grievances before they escalate to litigation. 

The Consumer Financial Services Committee’s newsletter can be found here.