Monthly Archives: March 2014

Buying or Selling a Company or Substantially All of the Company’s Assets!

Many people do not realize that an asset transaction or purchase may not be an asset purchase if, it includes substantially all of the assets of the Company may become a sale of business transaction.  It does not matter what form the assets are in or where they are located, if the purchase is a transaction involving substantially all of the Company’s assets, then it is not necessarily a simple asset transaction.  You may want to make sure that the Company is still operational and able to conduct some form of legitimate business activity using the remainder or excludes assets.

However, this often gets a bit more complicated, because of having to define substantially all of the Company’s Assets, what does that mean?  Honestly, there is some disagreement between state and federal courts, and disagreement between the judges of those courts.  However, generally, substantially all of the Company’s assets really does have to do with maintaining the business of the Company as an ongoing concern after the asset purchase.

So, you purchasing the most valuable asset or the assets that generate the most revenues, gross or net profit generally, does not qualify as a sale of substantially all of the company’s assets or a sale of business transaction as long as, the business of the Seller or Selling company is still an ongoing concern.  This is where people sometimes fail to recognize the impact of negative covenants, non-competition, confidentiality, or intellectual property provisions on the Seller’s ability to continue as an ongoing concern.

If restrictive covenants, non-competition and non-solicitation provisions are overly broad the Seller may be overly cautious in light of your agreement, and you may be opening the door to a sale of business transaction or a sale of substantially all of the Company’s assets. Be vary of doing so. Not, because of the Seller possibly, asserting that the transaction was a sale of business transaction, but because the Creditors of the Seller may want to find a way to satisfy outstanding claims.  So, successor liability from a sale of business transaction or a sale of substantially all of the assets of the Company may be a method of satisfying those Creditors.  For example,

1) The IRS or IDOR back taxes the Seller or the Company of the Seller owes for employee withholdings, corporate taxes, penalties and interests, and affordable health care act penalties;

2) The employees looking to collect unpaid wages, bonuses, commissions or retirement benefits;

3) The contractors or sales representatives looking to acquire their commissions or payments;

4) The lenders looking to satisfy outstanding balances on loans, lines of credit, or credit card companies;

5) The suppliers or vendors holding unsatisfied accounts receivables;

6) The IP holder holding an IP infringement claim or breach of a licensing agreement; and many more.

So, thanks for identifying the risk or problem, but what is the solution?  Well, creative lawyers, legal teams and professionals looking to problem solve and make a deal happen is the first thing, the Buyer will require.  As for some potential solutions, the Buyer, may, want a requirement that the Seller continue business operations for a reasonable period after the closing of the transaction.

Maybe, tie the reasonable period to an earn out payment that is paid to the Seller based on milestones for reaching time periods set out by the Buyer.  Maybe, have the Buyer place an order(s) or agree to order a certain percentage of the raw materials, or supplies needed from the Seller for a reasonable period to ensure sales and operations as an ongoing concern.  Have the Buyer pay a consulting fee to help streamline operations procedures and incorporation of Seller’s Assets into the business of the Company. If you require other options, then feel free to contact us at: http://www.vrplawgroup.com or check out http://www.corporateacquisitionsattorney.com

Copyright Extensions, Mickey Mouse, Bill Clinton and Pioneering Copyrights?

What do Mickey Mouse and copyrights have in common? Well Walt’s Mickey Mouse is one of the longest running Copyrighted Characters in U.S. history!  Most people have grown up with Mickey Mouse – he’s been around for a long time.  Now, he is in danger of falling into the public domain, where anyone can use him or alter him.  Copyright law, however, might be able to protect him forever.  This is news that has some people excited, but others don’t see the point.

While copyrights may seem to last forever, this was not always the case.  In the early 1900s, copyright protection lasted for 28 years, which was later doubled.  Then, in 1976, Congress changed the law again; protection then lasted for the life of the author plus 50 years.  Today, copyrights last for the life of the author plus 70 years.   After protection ends, the work falls into the public domain, where anyone can use it.

So, what does this mean for Mickey Mouse?  The 1976 change originally made him available to the public domain in 2003, but President Clinton signed an extension of copyright, so he is still protected.  This is a source of constant debate of copyright attorneys, authors, singers, musicians and film makers.  On one hand, if copyright is weakened, then others can use works in the public domain and creativity may actually flourish from the increase in derivative works.  However, it makes sense to protect the hard work of authors like Walt Disney and others that provided so much contribution and enriched our experience and the experience of our kids.

Some believe that copyrights should never expire.  This may make sense for certain types of Works that have been ground breaking and the source of creative inspiration for others.  Perhaps, there should be a pioneering copyright like pioneering patents?  What do you think should there be stronger and extended protection for some copyrighted works over others?