When Is A Partner Not Really A Partner?

Unfortunately, the word “partner” is loosely used in general conversation. However, in today’s business world there are in fact very few true “partners”. Legally, one may only be either a general partner or a limited partner within either a general partnership or a limited partnership. General partners are liable to the outside world for any and all obligations of either a general or limited partnership. Conversely, limited partners have no such personal liability. Notwithstanding this fact, people commonly, and often mistakenly, refer to themselves as a partner of someone else.

Similarly, you must realize that neither a corporation nor a limited liability company has any partners; the former has directors, officers and shareholders (also known as stockholders), while the latter has only managers and members.

We have formed and properly organized many partnerships, corporations and limited liability companies. Let us assist you in this regard and protect you from the personal liability and exposure of a true “partner”.

Attorney Opinion Letters

It is very common today for a lender that is located in one state to agree to make a loan to a borrower located in a different state and where the collateral or security for the loan is outside of the lender’s home state. In such instances, a lender may want some assurance that the loan to the borrower, should the borrower fail to pay (a default), will be enforceable.

As attorneys experienced in Nevada laws applicable to contracts, real property, personal property and loans, we are able to provide your lender the required attorney opinion letter confirming the enforceability of their loan. Contact us by calling (702) 451-7077 or use the form to the right for further information.

Failing Company Defense

A merger or acquisition that has the potential to lessen competition significantly may violate Section 7 of the Clayton Act, 15 U.S.C.S. § 18. However, a “failing company” defense has emerged from case law and legislative history of an amendment to Section 7 that allows an acquisition or merger to proceed if the company being acquired is subject to imminent bankruptcy or liquidation, and the acquiring company is the only prospective purchaser of the failing company.

Factors to consider in applying the failing company defense are, in order of significance:

  • The company truly is failing and has deteriorated financially beyond business reverses to probability of total failure;
  • No other prospective purchaser of the failing company is available despite serious efforts at finding an alternative purchaser whose acquisition of the failing company would have less anti-competitive effect;
  • Reorganization of the failing company following bankruptcy is unlikely to result in a viable competitor;
  • Market impact of the merger is relatively insignificant;
  • Potential harm to individuals is significant enough to allow the merger as a matter of public interest; and
  • The merger is not being undertaken with an anticompetitive purpose.

The first two factors are paramount in case law and in consideration by the Department of Justice and the Federal Trade Commission of premerger notifications in which a failing company defense is raised. The remaining factors have been referred to in case law but have not been determinative of the outcome of the case in the absence of the first two factors.

Congressional recognition of the failing company defense has resulted in special legislation for the banking and newspaper industries to implement the defense. For the banking industry, the Bank Merger Act of 1966 provides that bank mergers may not be challenged under the antitrust laws if the mergers have been approved by a banking regulator due to imminent failure of one of the involved banks. For the newspaper industry, the Newspaper Preservation Act provides an antitrust exemption for joint operating arrangements between newspapers in a locality that combine production but not reporting or editorial departments. Such immunized joint operating arrangements must be approved by the Attorney General on the basis that failure of one of the papers is likely to occur if the arrangement is not allowed.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Securities Law – Additional Offerings, Disclosure & the Securities Exchange Act of 1934 – Issuer Reports & Recordkeeping

Fair Disclosure Requirements for Public Companies

Regulation FD, adopted by the Securities and Exchange Commission in August 2000, provides that publicly traded companies must not make selective disclosures of material non-public information to securities analysts without making that same information available to the public generally. Whenever an issuer of securities or someone acting on the issuer’s behalf intentionally discloses material information to persons described in the four rules in Regulation FD, the information must be released simultaneously to the public. If material information is released inadvertently, the information must then be disclosed promptly to the public.

  • Companies that have issued securities registered with the Securities and Exchange Commission under Section 12 of the Securities Exchange Act of 1934,
  • Companies required under Section 15(d) of the Securities Exchange Act to file reports with the Commission, and
  • Closed-end investment companies (companies that are similar to mutual funds in investment strategy but have non-redeemable shares traded on exchanges).

Regulation FD does not apply to investment companies that are not closed-end or to foreign companies and governments.

Not all material non-public information about a publicly traded company must be made public if the information is selectively disclosed. Only information disclosed by persons acting for the company such as directors, officers, and employees with public relations or stockholder relationship responsibilities must be publicly disclosed and then only if the material information was disclosed to those who reasonably would be expected to trade on the information, including persons such as securities dealers, investment advisers, and stockholders.

Regulation FD also does not apply to information disclosed to persons such as attorneys, accountants, and investment bankers who owe a fiduciary duty to the company to maintain confidentiality of the information. Similarly, Regulation FD does not apply to information disclosed to persons who agree to keep the information confidential and who are subject to insider trading prohibitions if they make use of the information for their own benefit.

Rapid dissemination to the public is required for unintentional disclosure of material information. Regulation FD requires public disclosure of unintentionally disclosed material information “promptly” or as soon as reasonably practicable, prior to the next trading day of the company’s securities, and not later than 24 hours after an officer of the company learns of the unintentional disclosure.

Public disclosure must be designed to provide wide distribution of the information to the public. Filing of a Form 8-K with the Securities and Exchange Commission to provide the information may be considered adequate public disclosure.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Securities Law

An Outline of Federal Securities Laws

Two laws enacted in response to the 1929 stock market crash – the Securities Act of 1933 and the Securities Exchange Act of 1934 – remain the principal federal laws concerning issuance and trading of securities such as corporate stock. Other laws with a role in governing the securities industry include the Public Utility Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and the Sarbanes-Oxley Act of 2002.

The Securities Act of 1933 requires that important information regarding securities must be provided in the offer and sale of those securities to the public. The act prohibits deceit, misrepresentation, or fraud in the offer and sale of securities.

The Securities Exchange Act of 1934 gives the Securities and Exchange Commission regulatory authority over the securities industry. The Act also gives the Commission authority to discipline regulated securities industry businesses if those businesses engage in certain types of conduct. Finally, the Act allows the Commission to require companies with publicly traded securities to provide periodic reporting of information.

The Public Utility Holding Company Act of 1935 regulates interstate holding companies with operating companies in the electric utility and natural gas industries. Securities and Exchange Commission regulations govern the structures of the utilities and the transactions among the companies within each holding company.

The Trust Indenture Act of 1939 sets up standards for trust indentures that are formal agreements between the issuer of bonds and the bondholders. Unless such trust indentures are entered into, the bonds may not be offered for sale to the public.

The Investment Company Act of 1940 regulates companies such as mutual funds that trade in securities and then offer their own securities to the public. The Act requires disclosure of the financial condition and investment policies of the investment companies or mutual funds in order to reduce conflicts of interest.

The Investment Advisers Act of 1940 regulates investment advisers. Those companies or individuals receiving fees for their advice concerning security investments must register with the Securities and Exchange Commission and abide by regulations designed to protect investors. The law applies to advisers who have at least $25 million of assets under management or who advise a registered investment company.

The Sarbanes-Oxley Act of 2002 created the Public Company Accounting Oversight Board to review activities of the auditing profession. The Act also included various provisions designed to increase corporate responsibility, provide greater financial disclosures, and lessen corporate and accounting fraud.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Guide to Remedies for Anticompetitive Mergers

The U.S. Department of Justice in October 2004 issued the “Antitrust Division Policy Guide to Merger Remedies” to provide insight for businesses into the policies that Antitrust Division attorneys and economists will follow in determining what remedies will be sought for mergers or acquisitions considered anticompetitive by the Department of Justice.

The Antitrust Division has three options when it concludes that a proposed merger or acquisition may substantially lessen competition. The Division may seek an injunction to halt the transaction, negotiate a consent decree to settle the Division’s concerns about the transaction, or accept a “fix-it” remedy that permits a modified transaction to go forward that does not present the threat of a substantial lessening of competition.

The Policy Guide sets out the Guiding Principles for considering appropriate remedies. Remedies will be considered only after there is reason to believe that the merger or acquisition at issue would violate Section 7 of the Clayton Act. Remedies must be case specific, enforceable, and stated clearly enough to avoid the possibility of contrary judicial interpretation at a later date. Acceptable remedies must promote competition rather than competitors.

The Antitrust Division states in the Policy Guide that it prefers structural remedies over conduct remedies although both types of remedies may be needed in particular cases. Structural remedies involve the sale of assets by the merging firms while conduct remedies, such as injunctive relief, require continuing monitoring of the post-merger or post-acquisition firm.

A remedy that includes a divestiture must include a divestiture of both tangible and intangible assets to the divested company so that it is truly capable of operating competitively in the post-merger or post-acquisition market. The Antitrust Division prefers including an existing business entity in any divestiture so that any lessening of competition is avoided while the divested business begins independent operations.

The Policy Guide also presents Antitrust Division preferences regarding how chosen remedies will be implemented. The Division states that a “fix-it-first” remedy will be considered and accepted if that remedy eliminates harm to competition and if there will be no need to monitor the post-merger or post-acquisition firm. A “fix-it-first” remedy is a structural remedy that the parties to a proposed merger or acquisition implement prior to the transaction so that the Antitrust Division does not need to seek injunctive relief.

The Antitrust Division believes that a “hold separate” provision will have to be part of any consent decree that the Division would enter into that requires a divestiture of assets. The hold separate provision would be designed to hold the assets to be divested away from the resulting firm so that the assets remain “separate, distinct, and saleable,” according to the Division, so that effective competition will remain after the merger or acquisition.

In addition, any divestiture the Division will agree upon would have to be accomplished quickly (normally within 60 to 90 days) in order to restore premerger competition and to maintain value of the assets to be divested. In order to preserve competition, the Division will insist upon the right to approve any purchaser of divested assets. Restrictions on any resale of divested assets usually will not be agreed to by the Division, and seller financing of the purchase of assets to be divested is disfavored by the Division.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.

Business Review Letters — Antitrust Clearance from the Department of Justice

Before engaging in a business practice, individuals and companies may seek the view of the U.S. Department of Justice on the legality of the business practice under federal antitrust law. The procedure, known as a Business Review, allows persons to ask the Department of Justice for a statement of its current enforcement intentions. Although the Department of Justice is not authorized to provide advisory opinions to private parties, its business review procedure does allow such parties to seek a statement of present enforcement intentions.

The Business Review procedure is set forth at 28 C.F.R. 50.6 and is described on the web site for the Department of Justice. Past business review letters are posted on the web site. Typically, a business review letter will describe the information provided to the Department of Justice regarding the proposed business conduct, state whether the Department would challenge the proposed conduct, and note that information provided in seeking the statement of enforcement intentions will be made public except to the extent that confidential treatment is warranted under the business review procedure.

Topics covered by business review letters have varied from joint negotiation on behalf of cable systems of the purchase of programming to agreements among fishermen in a cooperative for sharing a catch limited by government regulation. The Department of Justice has noted that review is most often sought for proposed joint ventures and for proposals to share business information. For these more usual requests, the Department has stated that it will use its best efforts to have a response within 60 to 90 days if the request is supported with sufficient information.

Categories of information needed to support a “quick response” request to Department of Justice on proposed joint ventures and information exchanges are stated on the Department’s web site and include information describing the proposed conduct and any efficiencies or other benefits it may have.

Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.